Many Small Businesses Still Cool to Paid Search

Just one in 10 Internet-capable small businesses reported using pay-per-click advertising, according to a new survey, leaving ample room for the search industry to reach out to local advertisers.

In the poll of 460 small businesses with Web sites released yesterday by The Kelsey Group and ConStat, 11 percent reported using PPC advertising. Another 34 percent expressed interest in it, while 43 percent said they were uninterested.

The poll was conducted through opt-in e-mail lists that included only small and midsized businesses with Web sites. The actual percentage of small businesses using search advertising is probably much lower, since up to 70 percent of small businesses have no Web site.

“These are the early adopters,” said Greg Sterling, an analyst with Princeton, NJ-based Kelsey Group. He warned that the findings were only directional and unrepresentative of the vast pool of 10 million small businesses in the United States.

Most PPC advertisers are Internet-reliant businesses, the poll found. On average, they depended on the Internet for 48 percent of sales. More than 40 percent said that half or more of their customers come via the Internet, with two-thirds reporting that more than half their customer base is outside a 50-mile radius.

The chief impediment to adoption, cited by 60 percent of those not using PPC advertising, was that it was inappropriate to their business. Sterling said this represented a challenge for search companies to explain the benefits of search marketing.

“Certain categories of advertisers are going to adopt this form of advertising and others will not,” he said. “The small-business market is incredibly diverse.”

The findings illustrate the challenges facing search engines eagerly looking to tap small-business advertising beyond Internet businesses. The Kelsey Group estimates that local commercial search represents 25 percent of all search activity, and the local search market could generate as much as $2.5 billion by 2008.

Google and Yahoo's Overture Services both are testing local search platforms. Last week, Overture said it would release its local search advertising platform in a few months, letting businesses target their ads to searchers in a radius. Google advertisers can target ads to users in geographic areas based on their Internet addresses. Verizon introduced performance-based listings as part of an overhaul of its site.

“There are a lot of people using the Net to look for all kinds of things, including local commercial information, but the uptake on the advertiser side is slower and much more challenging to develop,” Sterling said.

Two-thirds of PPC advertisers in the poll said their main goal was to drive traffic to their Web site. Overture hopes to lure a broader range of small businesses by setting up Web pages with business information for advertisers without Web sites. Yahoo also offers various small-business services including Web site hosting.

Those that have adopted performance-based advertising are satisfied: The majority said they thought it would be an important ad vehicle for them in the future. For now, however, it remains a moderate chunk of their ad budgets, accounting for an average of 23 percent of ad spending. More than half of PPC advertisers said they planned to increase spending in the next year.

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