New Borrell SMB Report: ‘The Deer Have the Guns’

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borrell logoThere’s a contingent within media circles that attribute flailing revenues to a faulty product. The steep drop, they say, stems from the failure of online media to develop a suitable replacement to the subscription-based revenue streams which have been lost in the move to the web. But a new study from Borrell Associates suggests that the demand from small business advertisers has simply gone elsewhere .

The study, which surveyed 903 small business owners between July and August 2013, asked respondents how they planned to invest their advertising dollars, covering everything from print and yellow pages ads to social media and mobile. Business owners said they expected to spend only 12% of their 2013 digital advertising budgets on banner advertising, sponsorships, and classifieds — the products most commonly used to monetize a media company’s audience.

But here’s where the news gets worse for media. The study found that small businesses expected to spend more than half of their marketing budgets on owned channels, investing heavily in managing their website (35%), running email marketing campaigns (13%), and social media (14)%. To boot — roughly the same percentage of businesses owners said they “kept up on Twitter” (31%) as those that expected to buy a banner ad in 2013 (35%).

TLM2013 ad unitWhat that means is that over half of the relatively small marketing investments made by small businesses go to technology companies that build or manage software, not sell audiences. Take out the money generated by discovery content, which technology companies like Yelp have also taken over, and what’s left is a meager opportunity for media companies to sell brand advertising to cash-strapped small businesses.

“The most depressing thing, if you’re in the media business, is that the small businesses now have all of the retention on themselves,” said Gordon Borrell, the research firm’s chief executive, about the results. “It’s like the deer have the guns — they have their own media at their disposal.”

Another factor that’s compounding the revenue crunch for local digital media is that small businesses aren’t spending less on local newspapers — they’re spending more. While ad spending on national newspapers continues to plummet, small businesses actually planned to spend more on local newspaper advertising in 2013 than a year earlier. That means that a large portion of the prospective budget that would go to “branding” products like display is tied up in other investments.

Local media companies have hustled over the past 18 months to find their place in a fragmented local marketing environment, bundling services like SEM, website building, and promotions largely through partnerships with third-parties. But, an agency model does not monetize content — it monetizes the languishing sales forces of scrambling local media companies.

In an agency model, content becomes an odd appendage, supported in large part by a somewhat synergistic, but not particularly related, marketing services business. It’s unclear what competitive advantage content production provides a Gannett or Gatehouse over a pure-play marketing company with an comparable sales force in an “agency” market.

Meanwhile, the study also indicated that mobile marketing seems poised to have a big year in 2014. It found that small businesses marketing budgets are set to grow substantially (10%) next year as consumer spending picks up and business owners become more confident in the economy. With a slightly larger budget, small business owners are more likely to experiment with less proven tactics like mobile.

Steven Jacobs is Street Fight’s deputy editor.