New Data: Why SMBs Don’t Trust Advertising Anymore

SMBs don't trust advertising anymore.

It sounds a little nuts when you say it out loud at a time when Adwords and Facebook Ads still dominate digital advertising, but it’s true, and here’s why:

Business owners are more confused than ever about their marketing.

We live in the age of analytics and big data, but business owners are STILL victim to the confusion that a frustrated John Wanamaker articulated in the 1920s:

“Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

This is exactly how today’s SMBs feel about Adwords and Facebook Ads right now

And guess what? This is a good thing for agencies, media companies, and entrepreneurs who can step in and help.

Now, let’s investigate WHY it’s a good thing.


*Note: The insights from this post are based on Gordon Borrell’s 2018 VendastaCon presentation: 'Navigating the New Marketing Landscape'. Watch his entire talk here.

Table of Contents

What’s Driving Growth in SMB Marketing Expenditures?

Where SMBs Are Investing Their Marketing Budget

Email Outsourcing

Website Outsourcing

Social Media Outsourcing

Why You Need to Offer a Mix of Marketing Solutions

Why SMBs Need YOUR Help De-Muddling Their Marketing

How to Sell Based on SMB Needs

As I mentioned above, John Wanamaker’s famous quote “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” is still true today!

The marketing industry is in constant flux, and even the biggest wins in marketing have a life-cycle.

A couple perfect examples are what happened with Google keywords by mid to late 2000's, and what is now happening with Facebook ads. People rushed to adopt Adwords and Facebook advertising, but now signs are showing a slowdown for both.

Peter Dulay of Conversion Giant notes,

“Adwords is certainly NOT the emerging search engine ad platform it once was, offering endless opportunities for growth and profit. In fact, it’s quite the opposite. Google has become so good at cinching out advertiser’s profits by steepening competition and by forcing advertisers into programs like Shopping which are more difficult to manage.”

Peter Dulay

Director, Conversion Giant

SMBs using Facebook ads may face a similar fate. Rick Edmunds of Poynter shared his main takeaways on Facebook ads from Gordon Borrell’s local advertising forecast:

"While Facebook remains popular, some advertisers are troubled by price increases, a few find the spending ineffective and only a tiny percentage rely on digital marketing alone....In (Borrell's) survey, a little over half the businesses agreed that Facebook would merely stay even or 'begin losing steam in 2018 as other platforms (like Snapchat and Facebook's own Instagram) allow more advertising.'"

Rick Edmunds

Media Business Analyst & Leader of News , Poynter

Without the low-hanging fruit of digital ads, SMBs are searching for solutions that’ll deliver results, but they don’t truly understand what’s working for them across their marketing channels.

So what are they turning to? Let’s follow the money...

What’s Driving Growth in SMB Marketing Expenditures?

To understand where the opportunities in digital are, we need to take a look at trends in SMB marketing expenditures.

Borrell Associates runs the largest survey of local advertisers in North America, which means they know what advertisers are doing, predicting, and how they’re acting on predictions.

Here’s a broad-strokes look at what the data tells us about the marketing landscape in 2018:

  • Advertising is forecast to rise 5.3% overall, but the tide isn't rising for all media.
  • Traditional media (non-digital), especially print and broadcast, is projected to decline by 2.2% while digital media should increase 12.7%, or 126.8 million dollars.

So, there’s plenty of growth in digital...but surprise:

It’s NOT coming from advertising:

advertising is not driving the growth stats

This chart demonstrates the difference in SMB expenditures year to year. You can see that the blue line (local advertising) is projected to remain relatively flat, while the orange line (local promotions/marketing) is projected to grow significantly through 2021.

So what’s happening here?

Now that business owners are not seeing the results they once did in traditional and digital advertising, they’re looking to spend their marketing budgets elsewhere for the foreseeable future.

Gordon Borrell says this data shows that,

"(SMBs) are spending less and less and less on this media that's owned by other people, and they're spending more and more and more on this medium that they can actually control themselves."

Gordon Borrell

Owner, Borrell Associates

This indicates exactly where the true opportunities are in local marketing...

Where SMBs Are Investing Their Marketing Budget

Business owners are investing in marketing services.

And they’re investing a LOT of money—even tiny local businesses are laying down thousands annually for key elements of the local marketing stack.

Let’s take a look at a few key solutions that SMBs are focusing on...


1. Email Outsourcing

Email outsourcing is a big chunk of SMB spending.

For all local advertisers in an average year, about $3,300 a year was spent on email outsourcing. But you can see that some key verticals spend quite a bit more on email marketing than others.

Email outsourcing

Email continues to be a great platform for local businesses to reach their audience—with promotions, contests, newsletters, and more. In fact, email marketing averages an ROI of $38 on every $1 spent, which makes it the most powerful marketing communications tool when it comes to customer generation.

Look at how much these local businesses are spending on email marketing.

There’s a huge opportunity for you to get them to invest in YOUR email solutions rather than an email marketing provider, which 56% of companies currently use.

Related Reading: Humans Versus AI: Email Marketing Trends for 2018


2. Website Outsourcing

Website design and upkeep is another major expenditure for local SMBs.

They’re spending over $18,000 a year on it, on average. That’s SO much for these SMBs!

website maint. and design outsourcing

This is another big opportunity for local marketers to jump in and help with the immediate need and beyond, according to Borrell:

"What we're finding in this particular category is that whoever is serving them in this area, the advertisers actually see their own website (or mobile responsive site) as advertising. So if they equate that as advertising, don't you think the person who handles that for them is in a great position to give them advice on their marketing?"

Gordon Borrell

Owner, Borrell Associates

Translation: If you’re already handling their website, you have the opportunity to advise SMBs on ALL their marketing needs, and step in to provide solutions for other elements of the marketing stack.

Related Reading: 6 Step Guide for Selling Website Services to Local Businesses


3. Social Media Outsourcing

Social media outsourcing has experienced a surge in expenditures in recent years. Even tiny businesses with 10 or less employees spend $10,154 on social media.

This is another area where it really pays to understand what SMBs in specific verticals need. Case in point, realtor agents spend half as much on advertising as the typical advertiser but nearly 2x the average on managing social media.

Social media outsourcing

Plus, a big chunk of SMBs (32%) invest in social media only. Not only is that 32% of small business clients that you're currently missing out on if you don't offer social media services, it’s a group of businesses you can UPSELL with other products!

Related Reading: 28 Social Media Marketing Tips: The Expert Roundup

Related Reading: White-label Social Media Marketing Solution To Resell and Increase ROI

Why You Need to Offer a Mix of Marketing Solutions

As we’ve seen, SMBs are spending more money than ever on digital marketing services.

However, this doesn’t mean they’re buying isolated digital solutions, and it doesn’t mean they’re totally abandoning traditional media like T.V., radio, and newspaper ads.

They’re actually buying a mixture of everything.

Gordon Borrell found that a large percentage of SMBs are investing in a mix of solutions:

“74% of advertisers aren't buying one or another media, they're buying a mix. This is where YOUR role comes in to help advise them and help them understand what's going on.”

Gordon Borrell

Owner, Borrell Associates

digital is often a combo buy

Perhaps even more revealing, only 3% of SMBs used digital only, and only 22% used traditional only. The takeaway from this is pretty clear: If you want to be your client’s go-to local marketing expert, you need to offer a mixture of marketing services.

So all you marketing agencies out there, take note: Competition is heating up! You’re not the only ones out there noticing these trends, according to Borrell:

"(Traditional media companies) are now formidable competitors in the marketplace because they've seen their traditional revenue decline, and they've seen all their advertisers be really enamored with digital media. And guess what they're selling?...and they're selling it as a mix."

Gordon Borrell

Owner, Borrell Associates

Why SMBs Need YOUR Help De-Muddling Their Marketing

Business owners have a lot of marketing tools at their fingertips.

Social channels like Facebook, Twitter, Instagram, and Snapchat are free widely used. Boosting Facebook posts is probably TOO easy, and anyone with a credit card can launch a search campaign on AdWords. Almost everyone can take their own photos or videos with their smartphone. Even a new website is a few clicks away with the rise of website builders.

However, just because digital is so accessible to the masses doesn’t mean that the people running these SMBs understand how digital marketing works.

To put it another way, just because you CAN DIY doesn’t mean you SHOULD DIY.

To drive this thought home, Borrell found that 72% of the businesses surveyed are novices. They don’t really have marketing expertise, they’re making marketing decisions on their own (or with their wife, son, or relative), and they need your help!

In fact, marketing actually takes time away from their core competencies, notes Borrell:

“They’re too busy fixing leaks, making flower arrangements, and serving meals, and selling cars, and selling furniture to really understand digital marketing.”

Gordon Borrell

Owner, Borrell Associates

“They’re spending SO much time and they need SO much advice in this area. They’re looking for experts to help them.”

Gordon Borrell

Owner, Borrell Associates

Marketing is such a huge opportunity cost for that 72% of business owners who are novices at marketing. The need for marketing takes an average of 12 hours a week of their time away from the things they’re best at. Then it forces them to spend that time doing something they’re inexperienced at.

It’s a HUGE time suck!

digital is a huge time suck

Knowing this about your SMB clients and prospects will help you understand their needs, determine how to best communicate with them, and how to pitch your services.

This is also why it’s a great time to be you:

"It's such a great time to be in this business if you know what you're doing, have a great product like Vendasta’s, and are able to offer SMBs real insights and some real help."

Gordon Borrell

Owner, Borrell Associates

How to Sell Based on SMB Needs

Since we've followed the money trail and see what SMBs need, now's the time to make your agency the solution provider. Here's how to do it.

Your clients want results. That’s a given.

But there’s more to your relationship than that.

Businesses need a partner with a specific set of skills and values. Here’s what they’re saying they need from you (quotes from Borrell data):

Be Honest:

“Be open and honest about advertising effort, ROI, and metrics. Often, I feel like our advertising partners just want our money and don’t care if our ads are working for us.”

Borrell Survey Respondant

SMB Owner

⭐Honesty is easy when things are working. When a key campaign is struggling it becomes more difficult to report back to your client that things aren’t going as expected. Being honest in those situations is essential if you want to maintain a lasting relationship with your clients. They’ll need to know your honest opinion on what went awry and how to plan to move forward.

Provide Data:

“Have more relevant/detailed data specific to my industry and audience.”

Borrell Survey Respondant

SMB Owner

⭐Data drives many of the decisions we make as marketers, and SMBs are not blind to the effect that data insights have on the success of their business. Make sure you’re sharing relevant data with them and help them interpret what that data means for their business.

Educate Them:

“Educate us on the trends/metrics and experiences of similar businesses to us in the local area.”

Borrell Survey Respondant

SMB Owner

⭐If you want to keep your clients for the long term, you need to be integral to their business. Be the guide. Be the trusted local expert and educate them about how they can be successful in their market. The better job you do, the more likely it is they’ll understand your value and implement your ideas in ways that’ll make the work you do more successful.

Cut the Crap:

“Media partners are focused on hitting sales goals and will only present data that supports their products, and NOT what’s truly in the advertiser’s best interest. In 12 years of being the marketing director, on only two occasions has it happened that a media partner did not recommend their products for my dealerships…. All have data that shows their products are superior to their competition. They can’t all be right; therefore, it leads to doubt.”

Borrell Survey Respondant

SMB Owner

⭐Don’t sell against everything! You don’t always have the best option for your clients, and they’ll trust you a LOT more when you offer unbiased advice that’s in their best interest.

Speaking of trust...

Here's Gordon Borrel on how to earn an SMB's trust:

Related Reading: The Evolution of the Small Business in 2018

Final Thoughts

SMBs have options, they have tools, they have data, but they’re still confused.

They don’t trust advertising to deliver healthy ROI anymore and they’re looking for better options.

This sets the stage for YOU to enter their lives at this crucial juncture.

If you’re an agency, media company or entrepreneur who has the expertise to step in, make sense of it all, and help these confused SMBs, now’s a great time to do so.

It’s actually a REALLY good time for you to be in business.

To learn how we can help you become the trusted local expert and offer the digital solutions your SMB clients need, schedule a demo today!

About the Author

Patrick Liddy is a former Content Strategist for Vendasta. Prior to Vendasta, he earned his Master’s Degree in Public Policy & Management and was a Marketing Specialist at a digital marketing agency in Maine.

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