Small-business owners with Web sites show a clear preference for online marketing tools over traditional marketing methods, according to the results of a just-released survey. Respondents to the Spring 2004 Business Barometer of Online Activities were asked to select the three marketing tools they consider "critical in driving business." The top finishers were Web sites (69%), search-engine keywords (36%), and then community relations (35%). E-mail marketing methods (24%) beat out direct mail (22%) and long-time small-business marketing tool the Yellow Pages (12%). At the bottom of the list: newspaper advertising (5%), outdoor advertising (4%) and print coupons (2%).

"We were not surprised to see small-business owners rank nearly every online marketing tool...as more critical in driving business than the Yellow Pages and other traditional media," said Joel Kocher, chairman and CEO of Interland, the Web hosting outfit that sponsored the survey. "Clearly, more small businesses are starting to embrace the changing marketing algorithms that favor the results generated by online marketing tactics above those offline tools once used to market small businesses."

ONLINE REVENUE BOOST.  The online survey polled 171 of Interland's shared-hosting customers. Most (71%) report less than $1 million in annual sales, and 63% said they have five or less full-time employees. Of the group, 34% said they sold products or services online, and 71% of that group said they sold through both online and offline methods (such as through retail stores, catalogs or telephone sales). A majority of respondents (57%) said shoppers who purchased online generated more revenue than offline shoppers.

As part of the survey, respondents also were asked about online sales during the 2003 holiday season. An overwhelming majority (77%) said online sales during that period met or exceeded their expectations.

Respondents were also polled on media consumption habits. When asked to compare time spent collecting "industry and business information" using different media sources during 2003 vs. 2002, online outlets won hands-down. Of those responding, 45% said they spent more time in 2003 gathering information through e-mails and e-newsletters, and 36% pointed to industry or business Web sites.

POOR RECEPTION.  Industry trade publications only saw an 8% uptick in usage last year, but fared better than the remaining media sources. Daily local newspapers and magazines saw the largest drop in usage, both down 18%, between 2002 and 2003. Daily national newspapers seem to be of little interest to the group as sources for industry and business news, as 40% said they don't use them. Radio and TV fared only slightly better, with 39% and 38% respectively saying they don't turn to those media outlets either.

Other interesting data show that 88% of small and midsize businesses surveyed include their Web address on business materials (i.e. business cards and letterhead), 70% include it on their business collateral, such as brochures, 54% feature their URL on receipts or invoices, and 53% include it in offline advertising. Of the respondents, 34% said they have never heard of the recently introduced "CAN-SPAM" Act, and the 28% who are familiar with couldn't say how it applies to them.

When asked about e-mail usage in daily business activities, 85% said they use e-mail to communicate with customers, 80% said they communicate with partners and business associates via e-mail and 67% e-mail potential buyers.

Editor's note: Have a question about your business? Ask our small-business experts. Send us an e-mail at smartanswers@businessweek.com, or write to Smart Answers, BW Online, 45th Floor, 1221 Avenue of the Americas, New York, NY 10020. Please include your real name and phone number in case we need more information; only your initials and city will be printed. Because of the volume of mail, we won't be able to respond to all questions personally.

Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.


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