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Local Businesses Spend Billions OnlineMostly On Non-Advertiser Marketing: Report

This story was written by David Kaplan.
Local U.S. businesses spent about $6.7 billion last year for online marketing efforts, with only a fraction going to online advertising, according to a report by local media researcher Borrell Associates. The report, Main Street Goes Interactive (sub req.), advances the case that Borrell has made before: local advertising, the kind that has traditionally spent small individual amounts on newspaper classifieds and Yellow Pages is up for grabs. Unfortunately, content publishers have a tough time prying their marketing dollars for more general advertising purposes.

Keeping the money within: Small-to-medium sized businesses (or "SMBs") are expected to increase their total interactive ad spend 24 percent during the next five years from $7.4 billion to more than $9 billion. As the chart after the jump shows, most of that spending will go towards "non-ad marketing efforts" like site designwhen asked in which online media they planned to spend most on, two-thirds said marketing dollars would be devoted to their own sitessearch engine optimization and building customer data bases. While display currently commands 54 percent of their online budgets, that number is expected to decline significantly over the next year.

Prying SMB ad dollars: Apart from the economy and a general reluctance to spend a lot of money on outside advertising, publishers tend to have a flawed approach about prying away their ad dollars. In general, Borrell says that ad sellers have treated these companies like any other marketer. Instead, Borrell advises focusing on how large a company isbased on the size of their staffand relating that to a particular business category. That way, companies can better gauge how much they might spend and ultimately be more receptive to parting with some of the marketing budget for a more traditional online ad campaign. View the chart after the jump. 

By David Kaplan