Bringing SMB Ad Spend Online Poses Challenges

A survey of small and mid-sized businesses (SMB) that advertise online found just over half of marketing budgets will be spent online this year. Many plan to spend more this year than last.

Local online ad network DirectoryM polled 128 of its advertisers in the U.S. and U.K. for the survey. They found over 52 percent of the SMBs’ total advertising budgets are allocated to online advertising this year. In addition, 37 percent of respondents said they plan to increase online advertising spending in 2006.

DirectoryM targets small to mid-sized businesses with an online directory product distributed on over 20 business media sites in the U.S. and U.K., including WSJ.com, FT.com, BusinessWeek.com, and ZDNet. That directory listing, sold for an annual fee, often serves as an entry point to online marketing for many businesses, Chris Hill, DirectoryM’s SVP of marketing, told ClickZ.

“Once they come in and are comfortable, they’ll add other vehicles they’re interested in, but that will only happen if they have a trusted relationship [with the provider],” Hill said. According to the survey, 42 percent of respondents plan to add cost-per-click ads to their budget this year.

It also found 79 percent of respondents measure a marketing campaign’s success by the number of leads produced, while 52 percent measure success by the number of customers acquired or dollars earned.

After online, the next biggest share of respondents’ ad budgets goes to direct mail, which they find easier to measure than branding campaigns.

“One of the barriers to moving ad dollars online is that they don’t know how to track their results online,” said Hill. “With direct mail, they’re used to having an offer code to match the response to the specific piece. Once more advertisers know that a dollar spent online can get them $3 in return, and they can show where that return came from, more dollars will move online.”

The survey found 95 percent of SMBs manage online advertising campaigns themselves. With limited time and budgets, learning how to measure the value of different types of online ads eases the transition.

“It’s a challenge to work with small businesses. You have to have some level of ‘high touch.’ Firms that think they’re going to do this through completely electronic means, through self-fulfillment, are off the mark,” Hill said.

DirectoryM crafts offerings to maintain the advertisers’ comfort level. By pricing its directory offering as an annual fee, for example, it mirrors an offline yellow pages ad, which local advertisers are used to buying. When it’s time to move up to more sophisticated forms of online advertising such as search marketing or pay-per-click contextual ads, the company makes it a point to compare the value of the buy in terms the advertiser understands, estimating the number of leads a customer would get from a campaign with DirectoryM as compared to competitors, Hill said.

“Business owners appreciate our open ‘value pricing’ approach,” he said. “They’re really looking to be educated about how to evaluate the value of online campaigns.”

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