Chicago - 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]