Housing Market Could Send Small Home Services to the Web

Silver linings have been hard to come by in the collapse of the housing market. But a new study suggests there is one in store for the online ad market.

Small and medium sized business in the home and trade services categories will likely develop online presences in the coming years at much higher rates than they have previously, bringing with them a large portion of their local advertising dollars, according to a new report from The Kelsey Group.

Such SMBs had been slow to develop a presence online when the housing market was booming because they were already turning away customers, said the study’s author, Matt Booth, SVP and program director for interactive and local media at Kelsey.

“When you’re turning away work, you’re not going to start a Web site or invest in search ads,” he said.

Hence SMBs in the home and trade services were spending much less of their ad budgets on digital media than other advertisers. According to the study, they spend 83 percent of their ad budgets on traditional media (largely on Yellow Pages ads), while all SMBs put 68 percent of their ad dollars towards traditional media. E-mail marketing spending represented the biggest discrepancy, commanding just 3 percent of ad budgets from home and trade services, opposed to 13 percent from advertisers in other categories.

As home values drop, and homeowners lose the ability to take equity out of their homes for renovations — or in some cases lose their homes altogether — Kelsey predicts a shift. Home and trade advertisers will begin looking for clients online.

“Now that the market’s dried up — it’s basically dropped in half, from Q1 2007 vs. Q1 2008 –now those people are going to say, ‘Gee, how do I find work?’ ” explained Booth. “That means a whole lot of those ad budgets are going to go to interactive spend.”

The report predicts 60 percent of home and trade services companies will have an online presence in the next 12 to 24 months, up from just 33 percent now. With more than $20 billion in advertising budgets to spend each year, that should mean a significant infusion of cash into local online ad markets. Already, the category represents 15.8 percent of the Web ad market, according to Kelsey.

Of course, if the housing market remains depressed, all the online advertising in the world won’t necessarily bring in new clients, meaning many of the home and trade services SMBs experimenting with Web marketing could have a less-than-satisfying experience the first time out.

But according to Booth, almost any advertiser using online advertising for the first time will experience some disappointment.

“A lot of these people will go online and have a bad experience no matter what, just because Internet advertising is difficult and complicated,” he said. “I think it’s going to be a mixed bag, but I do think it’s going to happen.”