Small Businesses Struggle With Search Marketing

Microsoft just released results of a survey of 400 small businesses (SMBs) that shows they continue to struggle with search marketing (how to think about it, how to do it). This is consistent with what I and others have observed about the majority of SMBs, even those with websites. The search engines want to reach this massive market directly but have found it very difficult to do so without working with established sales channels and partners (newspapers, yellow pages, webhosts, etc.) that have existing SMB relationships. That can be problematic in some cases because the various revenue sharing agreements diminish the available funds for a paid search buy (but that’s a lengthy topic for another time).

First some context. Here’s a breakdown of US businesses by headcount according to US Census data:

Source: US Census (2004)

All but a tiny fraction US businesses have less than 100 employees. Most have fewer than four.

Now back to what the Microsoft survey found:

• The study revealed that 59 percent of small businesses with Web sites don’t currently use paid search marketing, and of those, 90 percent have never even attempted it.
• Nearly nine in 10 (89 percent) feared keywords may become too expensive.
• Eighty-one percent questioned if paid search marketing is the best use of their marketing budgets.
• One quarter of respondents believe paid search marketing is too complex.
• Twenty-one percent thought it would be too time-consuming.
• Thirty-five percent felt they would need an agency to help set up a search marketing campaign.

Opus Research recently found in an earlier SMB advertiser survey (n=1089, 8/08), among SMBs who did no online marketing, the main reason was confusion:

Source: Opus Research, AllBusiness.com (2008)

This is “online marketing” in general and not search per se. But the findings, as the Microsoft data suggest, would be magnified for search among those not doing it. However the same Opus survey found that paid search was cited as the third most effective marketing method among a list of 15 media types, after email marketing and print newspapers. So those doing it have seen its value presumably.

Yet even among those SMBs that are doing search marketing, many are doing it in ways that diminsh the effectiveness of their spend. SEM platform provider Clickable found that more than 50% of 1,000 SMBs on its platform failed to implement conversion tracking and were thus wasting some of their budget by not really gaining insight into the true ROI of their keywords.

While progressive SMBs and “e-tailers” were among the first to adopt paid search as a direct response medium, the majority of small businesses are mystified by the mechanics — the “how” — of search and need simple tools and/or third party help. Yet their spend is such that it may be hard for a third party without a substantially automated/scalable platform to build a sustainable business model around it. For example, Palore recently found the following about the average paid search spend of certain categories of SMBs:

Source: Palore

But there are other data that show an even smaller monthly spend. The volume is great, but the spend is relatively low. Unless or until the engines can provide an even more simplified way to do paid search they’re unlikely to acquire large numbers of additional SMB advertisers, except through complex third party relationships. (Google “simple ads” has yet to appear.)

Thus for SMBs and search engines there will likely continue to be challenges and frustration — on both sides — for at least the foreseeable future.