Small firms' Web spending lags

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While companies of all sizes are increasing their online ad spending this year, small and midsize businesses lag larger enterprises in terms of the percentage increase, according to a new study by research firm Outsell Inc.

The Outsell report analyzes ad spending trends for small, midsize and large businesses. It was based on an online survey of more than 900 b-to-b advertisers.

Large businesses are defined as those with more than 1,000 employees; midsize businesses as those with between 100 and 1,000 employees; and small businesses as those with fewer than 100 employees.

The report found that large businesses will increase online ad spending this year by an average 21.3% over 2005, compared with an average 17.9% increase for midsize businesses and an average 18.0% increase for small businesses.

Online advertising part of plans

Outsell also found widespread adoption of online advertising across all studied companies, although small companies lagged large and midsize companies in online usage.

According to the report, 85.5% of large companies and 84.0% of midsize ones use online advertising of some type, compared with 75.0% of small companies.

Outsell asked companies that are doing online advertising how they allocate their online ad budgets. "Small companies are spending twice as much of their [ad] budgets, as a percentage, on trade Web sites as medium and large businesses," said Chuck Richard, VP-lead analyst at Outsell.

According to the report, small businesses spend 12.6% of their total online ad budgets on trade Web sites, compared with 6.8% for large businesses and 6.1% for midsize businesses.

"They are also spending much more than medium and large companies on general business sites," Richard said.

Small companies allocate 8.0% of their online ad budgets to general business sites, compared with 5.8% for large companies and 2.9% for midsize businesses.

The report also looks at how companies of different sizes are using various online marketing tools, such as e-mail, search, Webinars and sponsored content.

Webinar usage is increasing most among small businesses, with 71.4% of small businesses increasing spending on Webinars in 2006, compared with 30.1% of large businesses and 22.9% of midsize companies that will increase Webinar spending this year.

Search, meanwhile, is being used more by large businesses. The study found that 34.7% of large companies use search advertising, compared with only 18.6% of small companies and 17.6% of midsize businesses.

"We really haven't done much search yet," said Don Thompson, North American marketing manager at Hand Held Products, a manufacturer of automatic data capture devices, such as bar code scanners and handheld imagers. Hand Held Products has almost 1,000 employees.

"It's on our radar, but we really haven't seen the benefits yet."

Hand Held Products raises spending

Hand Held Products will be increasing its online ad spending this year, Thompson said. It uses online banner advertising on vertical sites that target the retail, transportation and health care industries, as well as e-mail marketing and Webinars. Its print budget will remain relatively flat compared with last year, Thompson added.

The Outsell report found that small businesses will increase print advertising by an average 9.2% over last year, while midsize businesses will increase print advertising by 4.0% and large ones by only 2.5%.

Johnson Controls, a global manufacturer of automotive systems and facility management products with more than 136,000 employees, has done some online advertising but still spends most of its ad budget on print, said John Hein, director of global marketing communications at the company.

"We have done some electronic advertising, and we're beginning to shift more that way, but we still advertise primarily in the trades," Hein said. The company has used online banner advertising, search and webcasts.

"With print advertising, we know the readership, the circulation and the cost-per-thousand," Hein said. "With the Web, it's a little more difficult to know who's coming."

Johnson has not done any TV advertising in recent years.

The Outsell report also found that large business will increase TV and radio spending by an average 1.5% this year, while midsize enterprises will increase TV and radio by an average 2.4%. Small businesses will decrease TV and radio spending by 2.3% compared with last year.

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