Though 63% of consumers and small business owners turn to the internet first for information about local companies and 82% use search engines to do so, only 44% of small businesses have a website and half spend less than 10% of their marketing budget online, according to research from Webvisible and Nielsen.

The research, which was undertaken to learn how internet users find local businesses from which to purchase products or services, finds an accelerating trend toward online media for local search. At the same time, it uncovers a significant disconnect between the way small business owners act as consumers vs. the way they market their businesses online. Webvisible calls this disparity “the great divide.”

Tools for Finding Local Business

The survey found that search engines, by a large margin, are the most popular source for finding local information.

The list of top sources for local information:

• 82% use search engines (such as Google, Yahoo, or MSN).
• 57% use Yellow Pages directories.
• 53% use local newspapers.
• 49% use Internet Yellow Pages (such as yellowpages.com or superpages.com)
• 49% use TV.
• 38% use direct mail.
• 32% White Pages directories

Of those surveyed, 50% said search engines (such as Google, Yahoo, or MSN) were the first place they looked when seeking a local business, while 24% chose the Yellow Pages directories.

Overall Satisfaction with Search High

An overwhelming majority of searchers (92%) say they are happy with the results they get when using search engines, despite the fact that 39% report frequently not being able to locate a particular known business. Webvisible said this means that while searchers don’t always find the specific business (no online advertising/no website, etc.), they may choose to contact a similar business with a stronger online presence.

Future Trends Show Accelerating Use of Electronic Media

Webvisible found that, in terms of overall media usage when looking for local products or services, this trend toward electronic media is accelerating. Online search and e-mail newsletters are the only forms of traditional media that are growing among consumers who wish to locate local products or services.

Compared with two years ago, respondents report they use search engines and email newsletters more, while they use newspapers, magazines, direct mail and radio less:

Small Business Web Presence is Low

Despite the growing use of online media for local searches, small businesses owners - when compared with the general population - are slightly behind the curve in terms of online media usage. Some 41% report turning to online search engines first, and 31% turn to Yellow pages directories first. Moreover, small businesses are also behind the curve in terms of their web presence. Only 44% of small businesses have a website.

This disparity, according to Webvisible, clearly illustrates the reasons why consumers have difficulty finding small business information. Many consumers report that they have struggled to recall the name of a business in their area or wish to quickly check the website for store hours, directions or a phone number, Webvisible said. However, when using a search engine to find a business they know exists, only 19% of survey respondents report never or rarely encountering trouble locating that business online and 39% say they routinely have difficulty.

Small Businesses Not Satisfied with Web Presence

Though less than half of small businesses do have a website, the ones that do are not necessarily seeking to get traffic to it, and are not happy overall with their online marketing. Among those small businesses that have a website:

• 51% believe both the quality and ability of their site to acquire new customers is only “fair” or “poor.”
• 30% of business owners feel that they typically do a better job of marketing than a close competitor.
• 78% believe they advertise in the same places as their competitors.
• Only 7% of small business owners say their primary marketing goal is to get more visitors to their website.
• 61% spend less than three hours a week marketing their website.
• 99% of small business owners are directly involved in the marketing.
• 65% believe it is very important to know where their customers come from.
• Only 9% are satisfied with their online marketing efforts.
• 78% of small business owners dedicate 10% or less of their budget to marketing. Of those, half spend less than 10% of their marketing budget on internet advertising, while 30% do no Internet advertising.

Narrowing the Divide - Small Businesses Making Gains in Internet Marketing

Though small businesses are behind the curve in terms of online media, the situation is improving, the survey found. As consumers continue to seek the businesses that they want to purchase from, they are forcing classic forms of push marketing to gradually fade. As the consumer audience moves to the web and search engines in particular, local businesses are making moves in their online marketing efforts. A look at the last two years shows that local businesses are closing the gap and beginning to advertise where consumers are looking, though the divide remains significant:

• Search engines are now the #1 resource for small business owners looking for local products or services.
• 69% of small business owners use search engines to find local businesses more often than they did two years ago. And 84% know what a “sponsored link” advertisement is.
• Over the past two years, 43% of small businesses say they have increased use of search engines in their marketing efforts. In contrast, use of traditional small business advertising mediums is on the decline:
  •  23% say they use the Yellow pages less
  • 42% say they use the local newspaper less
• New advertising mediums such as video, SMS, e-mail, and mobile devices are showing steep increases over two years ago among small groups of early adopters.

About the survey: WebVisible, Inc. in partnership with Nielsen Online, asked 2,159 US internet users, including 261 small business owners, how they were influenced by local business advertising. Data was fine-tuned by Nielsen Online’s weighting procedures to ensure maximum accuracy in reporting. Responses were gathered from randomly selected individuals in the Nielsen Online MegaPanel in October 2008.

For the purpose of this survey, the term “local business” refers to any retail business in a respondent’s local area, including restaurants, entertainment venues, places of recreation, etc. and services such as plumbers or accountants. The term “Internet Yellow Pages” refers to online Yellow Pages websites such as yellowpages.com, judysbook.com, superpages.com, etc.