SMBs' Digital Marketing Spend Outpaces Online Advertising by 2.5X

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Local advertisers are spending more than twice as much on digital marketing services than online advertising, according to a new report from Borrell Associates.

Small- to medium-sized businesses are spending an average of $17,000 per year on digital marketing services compared to $6,800 on online advertising, according to research firm Borrell Associates. Website hosting, design, and maintenance comprise more than half, or $202 billion, of the $390 billion slated to be spent on digital marketing services in the United States alone this year.

"The emerging lesson is that the Internet is actually not much of an advertising medium after all. It's an advertising utility. And serving that utility function can lead to a gargantuan digital gold mine," the firm noted in its report.

Marketing in the form of public relations will account for $50 billion in annual spend this year while SMBs will spend $47 billion on online consulting and research. Borrell Associates added that either one of those categories is generating more than what's typically spent on radio and newspaper advertising combined.

Search engine optimization will drive $40 billion in spending this year, email management will reach almost $43 billion, and online ad production will reach nearly $25 billion, the firm concluded.

Borrell Associates also uncovered some striking differences between small- and medium-sized businesses as it relates to overall spend and which marketing services maintain the highest priority. Businesses with fewer than 50 employees will generally spend less than $500 a year while a business with 50 to 499 employees spends $63,000 per year on average.

All combined, businesses with fewer than 499 employees account for 11.1 percent of all online marketing services spend, and a stunning 99.9 percent share of total business locations in the United States and 83.2 percent share of total employees. Of course, large businesses drive the lion's share of online marketing spend at $348 billion.

Borrell Associates expects mid-size and larger companies to bring more digital marketing services in house over the coming years. Meanwhile, the firm concluded that small companies "are likely to remain very fertile ground for agencies, media outlets and the pure-play Internet companies for the foreseeable future."