Report: Local Business Web Presence Grows, Marketing Lags

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Local business owners increasingly see the Internet as key to connecting with customers, yet rarely use it for marketing, according to new research.

The Kelsey Group released results of a poll it commissioned of 300 small businesses whose customers and suppliers are mostly within 50 miles to gauge their use of the Internet. The Princeton, NJ, consulting firm found that the majority said the Internet is an important factor in their businesses succeeding. Two years earlier, just 35 percent said the Web was important.

Yet only 6 percent reported using pay-per-click advertising, 14 percent said they optimized their Web site to appear higher in search results and 19 percent said they used Internet Yellow Pages.

Despite their increasing interest in the Internet, small businesses continue to rely on offline marketing, like the Yellow Pages and direct mail. In contrast to the small percentages using online vehicles, three-quarters of small businesses said they use the Yellow Pages and 39 percent send direct mail.

"That reflects the challenge that small businesses have in truly stepping into Internet marketing, and the challenge that the would-be providers of those marketing services have of acquiring those small-business customers," said Greg Sterling, an analyst with The Kelsey Group.

The Kelsey Group survey found the shift in small businesses' attitudes toward the Internet is most evident in their adoption of the first step in Web marketing: setting up a Web site. The study found that 48 percent of the small businesses reported having a Web site, more than double the figure reported four years ago.

"The perception is increasing among all small-business segments that you really need a Web site," Sterling said.

Yahoo announced yesterday that its small-business unit would offer domain registrations, part of the company's attempt to spur small-business use of the Internet. Both Yahoo's Overture Services and Google have released local search engines and advertising programs designed to lure small businesses to search marketing. Overture's Local Match ad program includes a business-locator page, designed to appeal to local businesses without Web sites.

Despite the moves by search engines, Sterling cautions that small local businesses just now are getting online, and performance-based search marketing remains too complex for mass adoption soon.

"It's going to take some handholding," he said.

Jupiter Research cites such reticence by local advertisers as a major hindrance to the expansion of local search advertising, which it thinks will expand slower than the overall online ad industry. The researcher forecasts local search ad spending will rise from $508 million in 2004 to $879 million in 2009. The Kelsey Group forecasts faster growth, with local search worth as much as $2.5 billion in 2008.

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