A fascinating new study called "Main Street Goes Interactive," from Borrell Associates takes a thorough and much-needed look at the advertising practices and attitudes of the so-called SMB (Small and Medium Businesses) segment - a poorly understood and fitfully researched pool of over 14 million U.S. businesses that collectively spends many billions of dollars annually on advertising.
In many respects, the SMB market is a victim of its own label: it's hard to draw too much insight when you lump small manufacturers and distributors, retailers and even restaurants into one undifferentiated group. At the same time, the Borrell study is more focused, and many of its top-line findings track well with research we've seen from data publishers surveying their own markets.
The Borrell study places SMB average annual revenue at just $212,000, with average annual advertising spend of $5,671. Where are these businesses spending those advertising dollars? Most typically in yellow pages, direct mail and coupon-based media. Perhaps not surprisingly, SMB's are migrating to the web, with 11% of the advertising budgets now spent online, up from 4% just three years ago.
A key study finding is that SMB's see the cost of building and maintaining their websites as part of their advertising expenditures. This insight is useful in helping to inform us how SMB's think about advertising, but ultimately it's a distinction without a difference. For most SMB's, their website is their capabilities brochure and/or their catalog. When I send out direct mail, I don't separate out the cost of the artwork and the paper and the printing from the cost of the mailing list and the postage. It's all an advertising expense to me. And that's apparently how SMB's think as well.
The more important point is that websites are now central to the advertising strategies of SMB's. According to Borrell, two-thirds of SMB's plan to spend more on their websites this year. It's also important to note that SMB's are fans of online directories and search engine marketing.
This study documents what an increasing number of savvy online data publishers have already discovered (think ThomasNet and Martindale-Hubbell among many others): the best way to buttress online advertising revenue is to help SMB clients improve their own websites, whether through design services, creation of online catalogs, providing SEO services, or even managing SEM programs.
SMB's are not sophisticated advertising buyers and they need assistance in this area. Those data publishers that are moving beyond solely selling online advertising to supporting SMB's with agency-like services for what SMB's consider to be a big part of their advertising activity - their own websites - have found both a warm reception and multiple new revenue streams. If you're not doing it, it's a strategy well worth considering.