I don't have reliable enough figures from my own research as coverage and spread of markets is very thin in comparison to big reports but I do have a few thoughts on local advertising spend. Before I go into this, you should know that my company specialise in delivering local traffic to service-based companies. I started researching this in 1998 and have done a great deal of testing, research and implementation in the last 6-7 years.
1. Targetting SME's is expensive. You get less spend and it's often more difficult to tie people down.
2. SME's, particularly small businesses, often have found few or no benefits from their web presence. Either from actually getting no benefit or not having the skills to pick out the benefits that may be there.
3. Many SME's will need more than advertising to increase revenue through local search. The fact that websites are often poor can be a problem, companies needing work on their site and advertising find it very hard to swallow.
4a. There's often large barriers to good SERPs for smaller, local companies. This is usually the result of 'directory' sites hogging phrases that would seem natural to target. This presents an opportunity as paid search can get around that issue.
4b. The amount of phrase variance on lesser searched terms is massive and impossible to predict. Imagine, for example, a landscaping company who operate in the London area. Firstly have the different services that people may search for, much more than if you were looking for a credit card, such as turfing, paving, fencing, irrigation, lighting, etc... Then you have hundreds of locations that people may search for. you then typically will have another qualifier in the phrase which gives literally millions of combinations. This can be worked with when it comes to paid searches, although time consuming. Doing the same for SEO for a SME - too costly for most.
5. Word of mouth in corporate circles can be a goldmine but as the company size gets smaller the likelyhood that lots of business will come from a job well done decreases. I recently did consultancy work for a company that relied entirely on word of mouth at director level. Our first meeting was straight in a level just below the corporate board (one of the world's largest banks). What relevance does this have to local search? Well, networking like this just doesn't happen once you get down to SME's meaning you have to constantly chase business which can be costly.
I could go on but it's already a sizeable post, any questions just post a reply.
