Sunday, 29 November 2009

SMEs Favour Social Media and Email Marketing over Banner Ads

Small & medium sized enterprises (SMEs) sometimes struggle with the efficient and effective utilisation of the increasing variety of online advertising channels and formats due to their limited budget, lack of human resources and lack of in-house marketing expertise. The entire range of Web 2.0 applications and services and in particular the growing popularity of social networking platforms have obviously further changed the patterns of budget allocations for marketing activities, according to the results of survey conducted by VerticalResponse and published by eMarketer.

The majority of the SMEs with less than 500 employees plan to increase the marketing spending for email marketing and social media marketing in the year 2010 whereas they budget for online banner ads will be cut down significantly. Nearly all SMEs will carry out email marketing campaigns in 2010 and three out of four SMEs will even increase their spending for email marketing (see table below, click to enlarge).

Similarly, almost 80% of the SMEs will carry out online marketing activities on social media platforms such as Facebook, Twitter or YouTube and two third of the marketing managers intend to increase the spending for those communications. Unfortunately, the survey does not shed light on how exactly and for what marketing formats the budget will be used on social media platforms, but since most of these websites offer cost-per-click advertising (e. g. the adverts bar on the right in Facebook) I assume that the budget will go there.

As far as search engine marketing is concerned, almost half of the surveyed SMEs will invest more in paid adverts in Google, Yahoo, Bing or other popular search engines.

If companies plan to increase the marketing spendings does this then mean that they have more financial resources available despite the economic crisis? Certainly not! The survey data gives clear evidence that online banner advertising is losing importance for SMEs. Nearly 55% of SMEs claimed they will not carry out any display advertising campaigns in 2010.

It is not stated in the survey how many of the 831 small & medium sized enterprises of the sample enterprises belonged to the tourism sector and thus generalisations for the tourism industry per se are not valid. However, the research outcome clearly indicates that banner advertising is losing importance in favour of social media, email and search engine marketing.

Display ads can be effective for certain marketing goals (e.g. branding) and there are without doubt design agencies that develop highly creative rich-media banners (I love the artistic banners on e. g. DoubleClick). However, the shortcomings of banner ads are also well-known. First of all the production and display costs for an appealing banner can be rather high. On the other hand the click-through-rates (CTR) are usually relatively low with an average of 0.5-3%. Further, many users consider banner ads as annoyance and turn a blind eye on them. The biggest problem for SMEs is, in my opinion, that successful banner advertising always requires the cooperation with an online advertising agency which causes additional costs.

Search engine marketing tools such as Google AdWords, on the other hand, have become relatively easy to use and are moreover very flexible and quick in terms of creating, tracking and adjusting a campaign. Further, it is possible to achieve very good results even with a rather small budget.

The email newsletter seems to be still the most popular online marketing tool among SMEs and many enterprises regard it as an inexpensive and effective way to reach new customers and to generate fast responses, according to the “2009 State of Small Business Online Marketing Survey” (see table below, click to enlarge).

However, compared with other online marketing tools (e. g. keyword advertising) email marketing obviously causes difficulties in terms of the implementation as well as the tracking and measuring of the performance. Besides these technical and organisational obstacles, email marketing campaigns often fail to generate good conversion rates because the content is not geared to and not relevant for the recipients. The lack of relevant and personalised content is the number one reason why users unsubscribe from newsletters, as revealed by a recent study (see chart below, click to enlarge).

One out of four users further complained that they had problems with managing the email newsletter flood. This is doubtless a big shortcoming of email communication, especially with the ever increasing spam that we receive every day.

There are, however, interesting and effective alternatives to traditional email marketing which can be implemented by SMEs without great effort, for instance RSS-feeds or Twitter-tweets. New tools such as Google Wave and Mozilla’s Raindrop promise to offer new forms of organising and bundling online communication by combining multi-media content exchange and chat-functions.

Maybe these new tools and services will have the potential to oust or at least complement the traditional email newsletter as a marketing tool in the near future. What do you think? Share your opinion with us!

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