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The recession may have cut advertising budgets, but at least for small business owners, more of their dollars are going online.

According to new findings from research firm The Kelsey Group, small businesses are spending more money on online advertising than traditional media for the first time ever. But while they're spending more online, they're spending less overall. And that's not going to change. Dollars lost to the digital space won't be returning when the recession ends.

The Kelsey Group's study, "The Local Commerce Monitor Wave XIII," polled over 300 companies to find that digital spending has accelerated with the recession. 

Small and medium-sized businesses (SMBs) decreased the amount spent on advertising and promotions by 23.5% to $2,092 in the last year.

Before 2008, distribution between traditional and online advertising was about even. But as overall budgets have shrunk, businesses have turned toward the online space for increased value.

Despite the overall decline during the past 12 months, on average SMBs increased spending on Web sites and profile pages by 26.8% to $769 in 2009, up from $608 in the previous year. So far this year, more small businesses are experimenting with video advertising, some are using mobile, and others have ventured into contextual targeting ads.

According to Steve Marshall, director of research at The Kelsey Group, the milestone of digital/online surpassing traditional media among SMBs is an indicator of the broad shift to online platforms.

"Frankly, the rate of change greatly exceeded our expectations," Marshall tells Econsultancy. "We know that traditional media have been losing the value game — in the ROI race vis a vis online media — but the rate has picked up significantly."

The recession has hastened the shift online for companies with fewer than 100 employees polled by The Kelsey Group. And they're not going to change their behavior when budgets get a bit bigger. Says Marshall:

"There’s something important to keep in mind. I believe that there’s a ‘new normal’ that’s being established for the ad mix by SMBs. Now it's weighted more toward online than print. Even when the economy rebounds, we don’t believe that money will flow back into print media. We believe that we’re seeing a permanent shift toward online. This is the new normal.”

Meghan Keane

Published 20 August, 2009 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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10th Degree Advertising

The ability to target a specific audience with a guaranteed ROI gives online advertising an effective edge, especially when ad budgets shrink.

almost 7 years ago

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