BCG finds that local online ad dollars aren’t that local

March 19, 2013

A new article from the Boston Consulting Group sheds some light on the world of online local advertising, a $21.2 billion market  in the U.S. and cited often by a variety of players from AOL’s hyper local network of news sites, Patch, to Yahoo as a the holy grail of ad dollars.

What the authors found is that small business owners – think of the local mom and pop run pizza parlors and  hardware stores-  only dedicate a fraction of their advertising budget to online.  BCG’s Sebastian DiGrande, David Knox, Kate Manfred and John Rose surveyed 550 small business owners in the U.S. who said that only 3 percent of their marketing dollars go toward online advertising. Instead they turn to newspapers and coupon mailers to find new customers.

“People think the small and medium enterprises are spending a lot of money in digital and the truth is that is not correct,” said Rose, a senior partner and managing director at BCG, said in an interview.

In reality most local online ad dollars come from larger businesses, such as auto dealers or retail chains which look more like national advertisers than small shops.

Rose said there is an opportunity to wrangle more of those dollars from small business  to online even though its difficult to parse the market opportunity since the landscape  is so fractured.

Because  small business owners are so busy the best way to entice them to advertise online is by word of mouth.

“The single most important (factor) were other local business people they knew- not the advertising media company that calls on them, not the outbound telemarketing arm of company X,” Rose said.







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