Small Biz Ads: The Year of the Web

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Atwood attributes much of the growth to a realization among small business owners that customers are researching potential purchases on the Internet and new Web services, such as click-to-call advertising, which have made it easier for small businesses without much of a budget to advertise online. He predicts local online advertising will jump more than 32%, to $7.7 billion this year. That's up from $5.9 billion last year

One company enjoying the trend is Ingenio, an advertising firm that offers pay-per-call advertising and works with Time Warner's (TWX) AOL and Microsoft's (MSFT) MSN network. The company expects revenues to grow more than 20% this year, surpassing the $100 million mark, thanks, in part, to increased participation from smaller businesses.

Ingenio CEO Marc Barach says the ability to tie advertising expenditures to calls, which turn into sales at higher rates than clicks, appeals to small businesses with tight ad budgets. "The consumer who calls is so much closer to a sale—they are past the information-gathering phase and they are ready to transact," says Barach.

Taking Search Local

The quest to capture more ad spending from smaller businesses is attracting traditional search advertisers such as Google. Last year, Google (GOOG) unveiled two local business advertising products in conjunction with its local search and map offerings.

Users can search through Google Local for businesses related to specific keywords near a location. The results are then displayed and marked on the map. Sponsored links from applicable advertisers appear in a blue box, before directory listings. Google also displays printable coupons, supplied through a partnership with Valpak.com, along with the local search results.

Google also offers free click-to-call services in its local search directory with technology provided by VoIP (VOII), a company that owns a patent on click-to-call technology. VoIP CEO Tony Cataldo says the company has seen steady growth through the involvement of advertisers such as lender Nationwide, which has click-to-call features on its Web site to let customers fill out online forms while speaking with a representative over the phone.

VoIP is talking to companies that can identify where a potential customer is via GPS software on their cell phone and then provide text messages when a nearby advertiser has an offer. The ads would allow users to call the store immediately if they are interested.

Cataldo believes that, as more large businesses get involved with click-to-call services this year, the small businesses that compete with them will follow. "These mom-and-pop shops want to be competitive," says Cataldo. "We are seeing them doing it now."

Google is not the only search engine trying to cash in on local advertisers through local search and click-to-call services. Search engine platform Yahoo has offered a similar service on its local search property since 2004.

Internet commerce giant eBay has offered click-to-call services since acquiring Internet communications company Skype in 2005. And in August, eBay and Google announced they would team up to develop click-to-call text ads. They plan to test the services early this year.

Smaller search engine Ask, owned by Interactive Corp. (IACI), also is getting into the market. In December the search engine unveiled its new AskCity service, which combines maps and local search with reviews and tickets from other online sources such as IAC's online local guide service Citysearch and ticket-service Ticketmaster. AskCity does not yet include advertising but eventually will offer opportunities for local advertisers such as online coupons, says Ask's vice-president for product management, Doug Leeds.

Web Ads Go Legit

Leeds is optimistic about the ability to make money from AskCity because it's a way for businesses that do not have a large Web presence to advertise. For example, a local business could potentially pay to have a button appear on a map when a user searches for services around an address near their store.

Such a button could link to a coupon, instead of a Web site, or simply a directory listing. "One of the nice things about this model is [small businesses] don't have to get a Web site," Leeds says.

A Web site, however, isn't the only thing holding local businesses back from advertising online. There is concern about the reliability of tracking for online ads due to click fraud, says Borrell's Atwood.

There's also the mixed message from traditional media companies with whom local businesses have advertised. Often they will only sell online ads with print ads, making online advertising appear like an extra rather than an effective medium. EMarketer senior analyst David Hallerman says this will become less of a problem as traditional media companies embrace Web advertising themselves and develop partnerships with Google and others.

Holahan is a writer for BusinessWeek.com in New York .