|From an SEM Perspective: Local Search is just Hype|
Small business adoption is nothing to get excited about
| 1:06 am on Dec 21, 2004 (gmt 0)|
Local Search innovation is really cool and exciting. Yet, much of the local search hype from an SEM's perspective is about small and medium sized enterprise (SME) adoption ~ no thanks.
- Some 22 Million of them (10 MM by some numbers). Using the 10 MM number, less than 4% of them are currently paying for internet advertising. Less than 50% of them even have a web site.
And SMEs annual advertising budget is less than 6k a year. $500/month. Sure the SME community is spending 22 billion annually on advertising, but 46% of the budget is going into traditional yellow pages. They can keep their $250 a month/ lol.
From a business, err, SEM standpoint Local Search means:
many small business clients.
a lot of client support.
Given what WE know, and in this marketplace, there are much better things to be doing with our time than chasing, selling, and servicing SMEs.
| 2:07 am on Dec 21, 2004 (gmt 0)|
|Given what WE know, and in this marketplace, there are much better things to be doing with our time than chasing, selling, and servicing SMEs. |
I would think that all depends on your business model. There are many up and coming search engine marketeers who would jump at the chance to service an SME. That is how I started. :)
Also, many of those SME's have a much larger budget than you would expect. The budget will reflect your efforts in promoting the value to the consumer.
Here's the big kicker, the market is still in its infancy stages and anyone with basic search engine marketing skills can secure a nice little niche servicing those local SMEs.
Don't let those numbers fool you. I'd have to question the accuracy of those numbers, especially based on my experiences serving SMEs.
| 4:56 pm on Dec 21, 2004 (gmt 0)|
I agree PageOne. There is plenty to be made servicing SMEs by enterprising marketers. IYP optimizing and marketing may not be glamorous or high profile but if you string out 50 to 100 local businesses you could carve out quite a profitable niche.
As it becomes more difficult to SEO your way into top spots on Google and soon Yahoo many skilled SEOs may look to these SMEs as a collective gold mine.
| 5:14 pm on Dec 21, 2004 (gmt 0)|
|Sure the SME community is spending 22 billion annually on advertising, but 46% of the budget is going into traditional yellow pages. |
Chicago, can I ask where the statistics came from? And, what year that survey was performed.
For many of my clients, the Yellow Pages have been cut from their budget or, they've opted for a smaller advertising space to trim the budget. Any monies that were cut or trimmed are now being funneled into their web site marketing budgets. PPC, PFI, etc.
Printed Yellow Pages are becoming a dinosaur. How do I know that? The writing is clearly on the wall. We had a delivery of Yellow Page directories about 3 months ago (residential). I live in a corporate community so we share dumpsters between two buildings (400 units+). Those dumpsters were full of those YP directories.
Don't get me wrong. There are still plenty of local businesses whose main source of referrals are the printed Yellow Pages. But, that number is dropping slowly or quickly depending on the nature of the business. For example; Locksmiths, Landscaping, Auto Repair, etc. are prime candidates for traditional YP advertising.
A little OT, I've always wondered what value a Locksmith would see in promoting online or in the Yellow Pages for that matter. If someone is locked out of their dwelling, they don't have access to that printed YP. Nor would they have online access. That one makes me wonder. :)
| 6:16 pm on Dec 21, 2004 (gmt 0)|
>>Chicago, can I ask where the statistics came from? And, what year that survey was performed.
The Kelsey Group found that 22 million small and medium sized businesses spend 46 percent of their advertising budgets on Yellow Pages marketing and put only 3 percent into search engine keywords. Kelsey Group 2004
JupiterResearch Analyst Niki Scevak 2004 - "Another factor, Scevak said, is that most small businesses don't advertise at all--and those that do tend to have small marketing budgets. Getting local advertisers--which The Kelsey Group says have a $5,000 marketing budget per year on average--to allocate spending online remains a "very, very difficult task," he said, with no clear answer in sight, except perhaps to change the pricing model to something that is more relevant to them."
According to the Kelsey Group, small business spending in local market advertising is roughly $22 billion annually across all media. 2004
In 2003, North American print Yellow Pages were worth roughly US$15.6 billion in annual revenues.
ConStat, Inc. 2003 Simba Information actually expects the yellow pages industry to grow in 2004, to $15.5 billion, from $14.9 billion in 2003. Simba Information
| 6:43 pm on Dec 21, 2004 (gmt 0)|
Se we've got what, SMEs that....
Spend their online adv dollars effectively
Spend their online adv dollars ineffectively
Don't spend adv dollars online
Part of the trouble with stats like this is that they represent a whole class.
From an SEM perspective, wouldn't it be the sub-classes that matter, and present the greatest opportunity?
Some categories appear spend a much larger percentage of their budgets for advertising of all kinds. (That's just my observation, no stats to back it up)
With-in that class there appear to be those that are those that seem to spend a larger share online, again, just my observation.
Are they doing it effectively?
With-in that subclass, how much of an opportunity for SEM providers do those who are not maximizing their online spending represent?
How about those SMEs that are not spending online? Is there a real opportunity there? Especially for the small SEM?
And how about the micro market? Where does that fit into this whole picture?
| 6:44 pm on Dec 21, 2004 (gmt 0)|
Thanks Chicago! I think some of the terminology might be a little off track, or, I am misinterpreting it. The classification of an SME (Small to Medium-Sized Enterprise) is anywhere from 1 to 250 employees on average. It is industry specific.
If a small business of 5, 10 or even 20 employees is only budgeting $5,000 per year for marketing, therein lies the problem. Maybe I've been in California for too long where the cost of living is different from those in the surveys. ;)
I find many small businesses who are more than willing to invest $10,000 or $20,000 a year into their online presence. Now mind you, the local drycleaners or Pete's Pizza probably does not want to spend that much online. But, the local distributor of a worldwide brand or something similar is a different story.
I sometimes wonder about all of the surveys, especially these inparticular. I guess it all comes down to the type of SME that you are targeting as a client and the type of SME that is being targeted in the surveys.
| 8:20 pm on Dec 21, 2004 (gmt 0)|
"SMEs Most Likely to Adopt Internet Marketing Are Newer Businesses, ‘Tech-Forward’ Organizations or Direct Mail Marketers
New Kelsey Group report identifies segments of small business that are more inclined to adopt pay-per-click and other forms of online marketing"
Article here [kelseygroup.com] that addresses your excellent points, ken and pageoneresults.
BTW, my first post was meant to spur conversation, test some preconcieved ideas, and maybe learn a thing or two about *this* community's feelings towards local search. Clearly I believe in this marketplace. Can I take your side now and provide some other stats:)
| 11:15 pm on Dec 21, 2004 (gmt 0)|
|Can I take your side now and provide some other stats:) |
Please do! And thanks for the link.
| 11:53 pm on Dec 21, 2004 (gmt 0)|
The Kelsey Group also reports that 25 percent of every Internet search is local in nature, meaning local consumers are looking for local merchants. However, less than 1 percent of local businesses have established an online marketing presence. [problem or opportunity?]
The Kelsey Group found that 22 million small and medium sized businesses spend 46 percent of their advertising budgets on Yellow Pages marketing and put only 3 percent into search engine keywords. [problem or opportunity?]
The Kelsey Group predicts that all forms of online advertising competing with print directories — mainly paid search and IYP — will see a compound annual growth rate (CAGR) of 6.9 percent between now and 2008.
Kelsey Group expecting local paid search advertising in the U.S. to reach $2.5 billion by 2008
In the U.S., most of those SMEs, the bulk of which have fewer than nine employees, conduct the majority of their business within 50 miles of their locations. Safa Rashtchy, a Piper Jaffray analyst
The results of a just-released survey of more than 5,000 online buyers conducted jointly by BizRate.com and The Kelsey Group showed that 25.1 percent of the respondents' commercial searching — defined as looking for a business, shopping or doing research before buying — was local in nature. The data also showed 44 percent of respondents are performing more local commercial searches than one year ago. In addition, 64 percent of survey respondents said "search engines are better" than printed yellow pages for finding commercial information.
New Kelsey Group-BizRate.com data from a survey of 3,887 online consumers, conducted in early September, on a broad range of shopping and search-related topics revealed the following: More than 74 percent of survey respondents said that they had conducted local searches. Among local search users, 27 percent of their total search behavior is for local information. Approximately 45 percent of local searches had a buying intent. The survey also found that 20 percent of all searches among this population are local.
The report, presented at The Kelsey Group's interactive local media conference, concluded that 61 percent of small and mid-sized enterprises believe the Internet is a significant advertising medium.
Kelsey Group-ConStat SME advertising data from June of this year reflects a 10 percent jump from the same time last year in the perception of the Internet as an important marketing medium.
The Kelsey Group and ConStat report that 78% of older small businesses -- those that have been in existence for more than 20 years -- rely on Yellow Pages advertising compared to 52% of those small businesses that have been around for less than 10 years.
In recent research to measure the understanding of online advertising, TKG asked 500 SMEs to rate themselves on a 10-point scale according to their grasp of Internet marketing. Almost 60 percent indicated fairly high levels of confusion about online advertising. [problem or opportunity?]
As Neal Polachek, Senior Vice President of The Kelsey Group, is quoted in the release "What is interesting is that the newer businesses are spending twice as much on advertising as compared to the older businesses relative to their annual sales volume...This tells us that the newer businesses should be drawn to advertising and marketing solutions that can clearly demonstrate positive returns on investment." Resources for local online advertising are well advised to target newer small businesses.
"There's tremendous inertia among small businesses and most don't have the time, as a practical matter, to learn about search. SMEs want to be in front of online consumers. But the search engines haven't done a particularly good job of educating SMEs, although they are starting to make much more of an effort. In fairness, this is partly because they don't have a channel into the local market." [problem or opportunity?]
edit- disclaimer: all of the above are direct quotes from news sources.
And finally... local search and SMEs surely are a critical area to keep an eye on, but national companies with multi-brick and mortar locations, franchises, et al. will have a significant impact on local search revenue for SEMs.
[edited by: Chicago at 12:22 am (utc) on Dec. 22, 2004]
| 12:01 am on Dec 22, 2004 (gmt 0)|
|BTW, my first post was meant to spur conversation, test some preconcieved ideas, and maybe learn a thing or two about *this* community's feelings towards local search. |
There are probably many in this community who live in parts of the country (world?) where SMEs make up the biggest portion of the potential client base. That's certainly the case where we are, and we are very active in educating our clients about the developments in local search, what those developments mean to them, and how best to get in now on the growing opportunities.
Some budgets may be small, but it seems that's just fine at this point in the local search game. As suggested earlier, a little early success is a good way to grow those budgets.
| 1:09 am on Dec 22, 2004 (gmt 0)|
I can offer a case study witnessed today.
Client started new business 1 year ago. Yellow Page ad was $850/month (1/4 page display ad) with a 1 year contract. Client considered it a "must have" -- it was the first contract the new business signed.
It is now time for YP renewal and client said "no thanks". Owner says customers have consistently shown knowledge of the business that could only come from the website content. Ongoing customer query "how did you find us" showed the owner that the YP produced only 3 or 4 customers per month, out of an average of about 70 new customers per month.
Best part of the story: the YP rep then dropped the renewal price to $3000 for the full year (a 70% discount?). Of course the owner said yes.
This is hitting the print YP's very hard and very fast. As business owners learn they are in a buyer's market they will take advantage. Local Search won't be about displacing the YP for that $850/month ad spend for long, but perhaps we are re-entering a market ripe for selling new opportunities to these business owners. They are not risk averse individuals, and perhaps they will feel they have some cash to invest in new ideas.
| 1:50 am on Dec 22, 2004 (gmt 0)|
|Best part of the story: the YP rep then dropped the renewal price to $3000 for the full year (a 70% discount?). Of course the owner said yes. |
Bad business on the YPs part. I can understand charging what the market will bear, but in this case it was clearly a gouging opportunity.
I've got a few clients that were spending upwards of $30,000 per year for their YP listings. That same $30,000 in an online marketing campaign will generate at least twice as many leads and, over a longer period of time. It really all depends on the clients industry. I can't think of many businesses that don't qualify for an online campaign, can you?
| 2:07 am on Dec 22, 2004 (gmt 0)|
thing is, a lot of local newspapers already have relationships with these businesses. local *is* the battleground currently and moreso in the future.
what are thoughts on shoplocal?