Twenty-three million small businesses power the U.S. economy. They account for half of all sales in the United States today and have created two-thirds of all net new jobs since the 1970s.
But these companies are not leaders in the online-advertising world. A survey of 550 small-business owners by The Boston Consulting Group found that only 3 percent of their advertising budgets flows online. Small-business advertising dollars are still primarily spent on traditional marketing vehicles, such as Sunday circulars and coupon mailers. (See Exhibit 1.)
Further, the survey found that many small-business executives are not fully aware of all the digital-advertising options available to them. And to the extent that they are aware of those options, they are often not sure what to do with them. This is why digital-advertising activity in the U.S. is driven by large companies.
These findings may come as a surprise, given the explosive growth that digital marketing has experienced in social media and mobile communications and how important the digital economy has become. The findings also stand in contrast to numerous surveys showing that a sizable percentage of small businesses promote themselves widely online—from websites and e-mail to Facebook and Twitter. But our survey suggests that when it comes to actually spending their advertising dollars, small businesses continue to favor very traditional channels.
Digital content and online-advertising companies, therefore, still struggle to effectively serve the advertising needs of small businesses and to bring their digital spending into balance with the rest of the industry.