Borrell Associates has a new report on small business ad spending that offers some interesting data and spending estimates:
The smallest U.S. businesses have average annual sales of $212,000 and spend just $5,671 per year on advertising – typically in the yellow pages or on direct mail ads or on coupons. But all that’s changing with the rise of the Internet – where they are now investing 11 percent of their advertising, up from less than 4 percent three years ago. These SMBs are blurring the lines between what’s advertising and what’s not. They consider whatever they spend on their own Web sites to be “advertising,” though in actuality that spending is a technology, design and telecommunications expense . . .
They are less receptive to buying banner ads (now accounting for 54 percent of their online spending, but declining) in favor of search-engine advertising, online directory listings, and streaming video. And they are diverting money toward something that feels to them like advertising, but in reality is technology-supported marketing: Web site design, search engine optimization and customer databases. Their current rate of interactive advertising spending is no drop in the bucket. The nation’s 14.6 million SMBs were responsible for more than $6.7 billion in locally generated, locally targeted interactive advertising in 2008 – more than half of the U.S. total.
I haven’t seen the full report. The estimate about average ad spend per year is consistent with other data. However it’s very difficult to generalize about the SMB market other than to say that they face a range of similar challenges when confronting online marketing and vendors/publishers face a range of challenges in selling to them.
Vertical segments vary quite a bit in terms of needs, discretionary spend, etc. As an example, I was speaking last night with someone who worked at CBS and he was talking about the plight of local TV advertising as a result of the decline of auto advertising. Autos has been one of the big spending local categories: SMB spending combined with coop ad dollars. Nobody is buying cars and that’s hurt everyone in the category, including the media segments that rely so heavily on the dealers and dealer groups for ad revenues.
As the excerpted paragraphs above suggest, SMB ad spending is a kind of cacophony of tools and tactics that border in some cases on incoherence. And there are an increasing number of vendors selling interactive and online ads to them. A case in point, here’s an ad that appears on the Seattle Times site (note the gold bar, which says “use search engine marketing to grow your small business”):
If you click the bar it takes you to this page:
This is reflective of how newspapers are now working with the same group of companies that YP publishers have worked with to simplify online advertising. They’re selling essentially the same products in some of the same markets. Here’s a relatively effective video that explains the Seattle Times’ program.
When these programs first started several years ago I thought they represented the key to the SMB shift and diversification from traditional media to online. And conceptually they still do. But churn has emerged and remains an issue with all these products. And now you have the problem of a range of publishers or sellers in a market offering the same potential customers products and services that sound very similar — essentially a “commodity service.”
Screenwerk 
March 18, 2009 at 2:34 pm
Having sold services into the smb world, and now being one….it is difficult. Millions of decision makers. Virtual ignorance as to the advertising options, effectiveness, etc. Some SMB’s have lots of experience w/ advertising–the local auto dealers, by example. Besides spending a lot on local tv they spent a lot virtually everywhere in every advertising medium. The larger the dealer/or a dealer w/ multiple locations/ the more likely they had an advertising staff making decisions. Compare them with the smaller more typical businesses referenced in the first paragraph–with an average business income of 200,000 and spending $5-6,000–you are really speaking about two different animals.
Each year more smb operators become somewhat more web savvy. The opportunities for spend are enormous–as are the options–but I can’t help but think it will remain very disjointed for a long time to come.
March 18, 2009 at 11:59 pm
YP is uniquely positioned to help SMBs make marketing decisions and to provide consultation on how to maximize ad dollars. Our industry is about lead generation and that’s what keeps the customers, new and old, coming through the door.
March 20, 2009 at 8:04 pm
This is a subject that many of us in the world of selling search engine marketing to SMB’s (and in my case, offering sales training to resellers) are becoming increasingly concerned about. Part of it is that there are so many companies now offering SEO/SEM that the business owner is getting contacted daily about the next best way to appear on Google or Yahoo! To try and do this is on their own is still difficult for the average SMB (although I do agree with the comment that they are becoming more savvy all of the time). My concern is “How” people are trying to sell SEM to small business owners. I have spent the last 25 years in the YP industry and have first hand some of the outragious claims sales reps make such as, “Being # 1 on Google”. There are many reputable companies out there, but anyone selling or consulting SMB’s who “does it the right way” should be very concerned about the bad reputation that is being spread by many sales reps and sales companies offering SEM or reselling SEM. I am attempting to sound the alarms with my own blog on this subject.
http://blog.matchcraft.com/?p=3
Now is the time for all of us who are truly trying to help the SMB make the right decisions based on their individual needs when it comes to SEM should start speaking out against this.