MerchantCircle Survey: $100 Monthly Spend Max

MerchantCircle recently conducted a survey and received 864 responses from its “most engaged [SMB] members.” The survey has a range of findings can be read about more fully here.

Here’s an excerpt of the high-level data (MerchantCircle verbatims):

Effectiveness of Yellow Pages

–24% of respondents rated yellow pages “not effective at all” or “mostly ineffective.”
–42% of survey respondents rated yellow pages as “effective” or “very effective” and 19% rated yellow pages “neither effective nor ineffective” (14% had no opinion or no experience with yellow pages).

Budget Allocation

Those who rated yellow pages as “not effective at all” or “mostly ineffective” allocated only 9% of their budget to yellow pages and a whopping 45% of their budget to internet advertising. Not surprising considering that 75% of this group rated internet advertising “effective” or “very effective.”

What was somewhat surprising was the response from 42% of merchants who believe YP is effective. Of those merchants, 75% rated internet advertising as “effective” or “very effective.” They allocate an average of 37% of their marketing budget to yellow pages and 30% to internet advertising (the remaining budget goes to newspapers, radio, TV and “other”).

Willingness to Invest

While, in general, survey respondents under-report their willingness to spend dollars, the local businesses we interviewed didn’t foresee spending big bucks on internet advertising even if it was guaranteed to work! Here’s what we learned:

  • Of merchants who rated the yellow pages effective, 73% would not spend more than $100/month on internet advertising
  • Of merchants who rated YP ineffective, 60% would not spend more than $100/month on internet advertising

Most interesting to me in the MerchatCircle survey is the finding that most SMBs aren’t willing to spend more than $100 per month on online, whether or not they believe print YP to be an effective ad medium. That’s $1200 per year. Compare that with a rougly $3500 average annual print YP spend. ReachLocal, by comparison, says it’s getting a minimum of $1000 per month from advertisers, but it’s going after the bigger print YP spenders.

Let’s assume that the MerchantCircle findings are representative of the SMB market (I think they’re representative of a select group of SMB advertisers). Half a million SMB advertisers spending $1200 per year on average would translate to $600 million — still quite a bit of change. (That 500K advertiser number is a threshold that’s already been crossed.)

There are roughly 3 to 3.2 million print YP advertisers (The Kelsey Group says 3.5). If 3 million SMBs spent $1200 per year that would mean a total of $3.6 billion in online spending. I’ve estimated that about 10% of the total “addressable” traditional, local SMB advertiser market can be expected to “self provision” eventually. That’s probably about 1 to 1.5 million. A much larger group will be sold packages of advertising that include online by local sales channels (premise, telephone, YP and newspapers).

Stepping back the survey (and my earlier YPA post) are part of what will become an ongoing stream of dueling datapoints and press releases. Online ad firms will continue to put out surveys and data that show usage and ad spend shifting online, while the YP industry will continue to issue data and survey results that show confidence and value in the traditional medium. And both will be right to varying degrees.

10 Responses to “MerchantCircle Survey: $100 Monthly Spend Max”

  1. Tim Cohn Says:

    What’s the $ size of the YP industry now?

    10% of the SMB market would be 300k not 1.0 to 1.5 million.

  2. Greg Sterling Says:

    No. SMB market is 23 million firms per the Commerce Dept. Addressable market is probably 10-15 million. There’s a lot of gray in there and a lot of churn. But the SMB market is much larger than the YP market. I didn’t make that entirely clear.

  3. Greg Sterling Says:

    YP industry is roughly $14.5 b in the US

  4. Ben Saren Says:

    These findings jive with what we’re experiencing on the streets.

  5. Greg Sterling Says:

    Interesting. Meaning the willingness to spend?

  6. Steve Cissel Says:

    I think the $100.00/month that the SMB’s are willing to spend is more of a reflection of what their willing to lose/risk.

    When we can show them that 1 will get you 10, then the numbers will rise.

    The majority of SMB’s still don’t get it. But they’re starting to.

  7. Darren Waddell Says:

    Great macro-analysis, Greg. What I found interesting was that most merchants were willing to spend $100 or less even if online was guaranteed to work. We asked the question this way to help us discover the upper-bound for products price point for our target audience.

  8. Online Ad Spending at Ghost of Midnight Says:

    […] another post, Sterling pulls together some other advertising data and estimates, including… Most interesting to me in the […]

  9. Will Scott Says:

    I’d like to see this expanded to ask the question of how many $100 customers are willing to grow on proof of concept, and what the tolerance for a “set up cost” might be.

  10. Tim Mischuk Says:

    What is the average spend and in what markets for the SMB customer over the year?

    We offer online marketing solutions for the SMB market and have found sizable growth for both direct mail and email marketing being forwarded to a Landing Pages or Personalized Landing Pages where the customer responds via a form and an email notification goes out and info tracked in a dashboard as an alternative to just Google Adwords.

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