Kelsey: Online ‘Penetration’ Passes Print

While I was out the past few days the Kelsey Group put out new data from its online “Local Commerce Monitor” that said the following:

[P]enetration of digital and online media increased from 73% in August ’08 to 77% in ’09. Meanwhile, traditional media penetration lowered from 74% to 69%. (Penetration is defined as the percentage of SMBs using the given media, regardless of level of spend.)

In May, 2006 I asked “Will the Next Recession Drive Online Ads?”:

Assume we go into recession in the next couple years, my thesis here is that event will potentially accelerate the adoption of online marketing because of its relatively low cost compared with traditional media, its “accountability” and its perceived efficiency.

Of course there are now dozens of studies that confirm this has happened and that traditional media have suffered across the board.

Let’s come back now to the Kelsey data. This is a significant milestone to be sure. The Kelsey Group has done this survey over the past several years and the trend dimension is significant. However I would use some caution in generalizing to the entire US SMB population. Many articles will be tempted to do this.

The sample size was 302 SMBs. In fact there is no “representative sample” of small businesses. In an online survey I conducted a year ago (8/08, n=1084) among US SMBs (via LMS/Opus Research) 53.8% on average said they had a website (we didn’t define “website,” so it could have meant to them any online presence). When asked about “online marketing” they said the following:

Picture 23

Admittedly these data are now a year old. I’m not suggesting they contradict the Kelsey findings; I’m saying that people should use caution in generalizing too broadly from the Kelsey data. One much always be careful in doing this when discussing the “small business market” as a monolith.

The other interesting bit that came out in the Kelsey press release is this:

According to the study, SMBs decreased spending on advertising and promotion by 23.5 percent, from $2,734 (reported in August 2008) to $2,092 (reported in August 2009). As a percentage of total advertising for the SMBs surveyed, digital/online has increased from 22 percent to 36.8 percent over the past year. In spite of the overall decrease in spending on advertising and promotion over the past 12 months, on average, SMBs increased spending on Web sites and profile pages by 26.8 percent, from $608 in 2008 to $769 in 2009.

There are two “takeaways” here for me:

  • Overall “ad” spending is going down
  • Spending is going into non-advertising areas

On the first point, we’ll have to see what happens after the recession ends. On the second — this is something I’ve discussed a number of times before — we’re seeing SMBs spend money on things that don’t count as “advertising” (e.g., sites, SEO) although they do constitute “marketing” expenditures. The overall $2,092 spend is off from the roughly $3,500 to $4,500 pre-recession average print yellow pages spend (which includes national advertiser spending).

Stepping back, the Kelsey data are no doubt accurately reflective of larger directional trends in the market and are symbolically and psychologically significant — akin to when consumer use of the Internet for local information surpassed print yellow pages.

However it’s important to point out that these findings still don’t change the fact that most SMBs remain confused and ill-equipped to manage their own online marketing.

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