SMBs Poised to Triple Website Spending

America’s 14.6 million small and medium-sized businesses (SMBs) were responsible for more than $6.7 billion in locally generated, locally targeted interactive advertising in 2008

That’s more than half of the U.S. total, according to a recently released report from Borrell Associates, which predicts these numbers will grow significantly as activities continue to shift online, writes Marketing Charts.

The report shows that the shift toward spending online is continuing among SMBs. While many have traditionally invested in Yellow Pages or on direct mail ads or coupons, SMBs are now investing 11% of their advertising dollars online, up from less than 4% three years ago.

But Borrell also found SMBs are increasingly blurring the lines between what is considered advertising media expenditure and what is not. Many SMBs consider money spent on their own websites to be “advertising,” though that spending is a technology, design and telecommunications expense. When marketing professionals were asked in which media they intended to spend more money this year, two thirds of them said “my own website.”

In addition to website design, this investment in technology-supported marketing, Borrell said, also includes search engine optimization and customer databases. Borrell forecasts that SMBs will triple this “non-advertising” marketing expenditure over the next few years and its share of the local interactive marketing budget will rise from 8% in 2008 to 18% in 2013.  “SMBs are collectively poised to plow billions of dollars into their own websites,” the report said.

SMBs are becoming less receptive to buying banner ads - which now account for a declining 54% of their online spending - in favor of search-engine advertising, online directory listings, and streaming video. Only 42.1% of survey respondents say that display advertising performs strongly for their company, compared with 56.8% who say search performs strongly, and 80.4% who say email performs strongly.

Though small businesses do tend to overspend on advertising relative to their size and present a significant and largely untapped market for online advertising, it may be more difficult than it first appears for local media companies to wring increased investment from them because they are “less like a two-ton gorilla and more like a thousand four-pound monkeys, difficult to chase down and almost impossible to corral.”

As they face an increasing deluge of offers to buy listings in online directories, to bid for keywords on search engines, to set up email marketing campaigns and purchase display ads, the owners of SMBs need to understand current options and practices for online marketing, Borrell Associates stated, adding that though some internet marketing products work very well, many “are oversold and under perform.”

View charts:

SMB Online Spending, 2008-2013

Change in SMB Local Interactive Marketing Budget

Selected Advertising Channels - Percentage Saying ‘Performs Strongly for My Company’