In order to truly deliver on the SMB opportunity, Facebook or Google needs to provide SMBs with an incredibly simplified lead generation and customer relationship platform.
Small to mid-sized businesses (SMBs) represent 99.7 percent of all employer firms in the U.S. and are responsible for 23.6 percent of local ad expenditures. Yet SMBs only accounted for 14.1 percent of total online ad spending last year, according to BIA/Kelsey. To date, no new media (defined as Internet-enabled) company has been able to engage a large share of this market as paying customers.
Early on it was believed that Yellow Pages and newspaper publishers would be able to translate their trusted relationships into the digital, social, and mobile media arena because of their large "feet on the street" sales forces. However, these sales forces have largely lost their credibility with SMBs because they aggressively pushed the higher margin traditional media products (declining value) at the expense of the lesser-known (increasing value) and lower-priced new media options. It was failure in understanding that the trusted SMB relationship was their core asset, not their products.
Enter Google with a self-service approach to media purchase and optimization. With over $30 billion in revenue, it has only converted less than 1.1 million domestic businesses or 4 percent into paying customers. Programs such as "Authorized Google Resellers" and "Google Local Ad Partners" have helped penetrate additional SMBs, but with high churn rates of 50-plus percent, Google has not yet cracked the code on penetrating the SMB advertising marketplace. Additionally, while the all-time leader in processing collected or spidered data, Google suffers from an inability to manage structured data accurately such as SMB listings' databases. This fact is a large inhibitor in SMB sales, as these business owners feel that if Google cannot manage the simple name, address, and phone number for businesses accurately, why would they invest money in Google's products; this fact presents an opportunity for Facebook.
Other startups in the daily deals (e.g., Groupon) and check-in services (e.g., Foursquare) have provided initial audience interest and growth with some SMB adoption. However, these services are merely features that can be easily assimilated into a more packaged platform. It should be noted that Groupon was successful at amassing a substantial sales force in under 18 months, something to learn from.
In order to truly deliver on the SMB opportunity, Facebook or Google needs to provide SMBs with an incredibly simplified lead generation and customer relationship platform that can be purchased in both a self-provisioned and an assisted-provisioned (locally sold) manner. Albert Einstein put it best: "Any intelligent fool can make things bigger and more complex...it takes a touch of genius - and a lot of courage to move in the opposite direction."
It is important to understand that SMBs have a different perspective and set of needs than larger, more corporate-focused businesses. Additionally, attempts at a "one-size-fits-all" product and sales approach tend to not work with this most skeptical buying group. Therefore, a multi-tiered offering that segments the SMB community by audience communication mode (e.g., branding, direct response, and customer service), industry vertical, and affinity grouping (retail vs. consumer services, etc.) will succeed vs. a linear, self-service-only approach. The easiest key to success in marketing to this group is to use product packaging and bundling to create "tailored solutions" so that the merchant feels that the advertising package addresses the unique attributes of their business (mode, vertical, affinity).
Localized products such as "Places" and "Deals" need to quickly evolve to a feature-rich "word-of-mouth" or referral-shopping platform that merchants can derive greater value from compared to the time investment in managing these properties. I applaud Google and Facebook for utilizing structured feeds from listing aggregators as a business entity foundation, however, much work still needs to be done here to improve accuracy and provide local SMBs with confidence in the offerings. Interestingly, business identity management (name, address, and telephone) has been a problem area since the divesture of AT&T. There are solutions that can be created based on processes and procedures that have their roots in White Pages listings management of years past. Addressing the issue of accuracy and completeness of the merchant database could be a major contributor to on-boarding SMBs. One simple tactic would be to phone/email/postcard-verify the listing information as a starting point of the sales dialogue. Much in the same way that telephone companies utilized this tactic to sell paid Yellow Pages advertisements off of the free White Pages listings information.
Indeed, the power of the social graph itself can provide much of the solution for marketing to this audience. Successful local businesses by their nature tend to be good analog networkers individually, and by participating in the community, civic causes, and organizations. Therefore, creating simplified case studies and value point communications incorporating local targeting for these SMB segments can be beneficial in reducing implied risk of the unknown and spur adoption.
While the details of solution are anything but simple; the marketing of local offerings, options for maintenance, and customer service/retention programs must be elegantly simple. The most misunderstood premise in dealing with the SMB marketplace is that the need for simplicity is based on the assumption that SMB owners are unsophisticated and the products and message need to be "dumbed" down. This is not the case; most SMB owners are cunning entrepreneurs that will simply employ the easiest, most cost-effective, and proven business building methods until they no longer work. Once the historic methods fail, they replace them with the one or two options providing the easiest implementation, highest return, and least pain of ongoing maintenance.
Google or Facebook are well-positioned to capture the highly desirable SMB market. Traditional local media platforms are continuing to decline at an increasing rate, providing online players with the opportunity to step up and solve the SMB community issues of branding, lead generation, and customer service communication. Currently, I score the fight dead-even; no apparent winner to date. The winner will be the first to translate the voice of the customer needs into an execution plan, developing an internal scalable sales force and moving faster and more wisely than the competition.
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Gregg Stewart is founder and president of 3rd Act Marketing, a full-service marketing agency and consultancy, specializing in digital solutions, headquartered in Connecticut. 3rd Act supports businesses and agencies of all sizes, including Fortune 500 companies. With more than 20 years experience, Stewart applies his successful tenured career in interactive advertising and local search to the ongoing development of digital and mobile solutions for his clients' online-marketing campaigns. Through his strategic counsel, national and local brands become better equipped to target and reach niche consumers for increased leads and sales. In addition to his ClickZ columns, additional columns can be found in the Search Engine Watch archive. In 2013, Stewart was recognized with the ClickZ Hall of Fame award.
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Gartner Magic Quadrant for Digital Commerce
This Magic Quadrant examines leading digital commerce platforms that enable organizations to build digital commerce sites. These commerce platforms facilitate purchasing transactions over the Web, and support the creation and continuing development of an online relationship with a consumer.
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May 6, 2015
12:00pm ET/9:00am PT