Small and medium-sized businesses (SMBs) are increasingly warming up to using online advertising and promotion channels. A report from Borrell Associates predicts these numbers will grow significantly as activities continue to shift online.
Taking a cue from this trend, here is our second post in a series of three posts, in which we get insightful tips from George Bounacos on how SMBs can effectively use online advertising that gets results and stays within their budgets.
What is your best advice to SMBs who want to advertise online today versus last year or even five years ago?
The landscape is always changing. Google's share of online advertising continues to grow as the amount of online advertising grows. Google captured about 35% of online advertising dollars just five years ago. Today that number is 44% and Google has increased the number of options available for businesses with "remarketing" (those ads that sometimes appear hours, days or even weeks after you visit a site), mobile advertising and new ventures in local advertising.
Traditional search advertising is only one way organizations should advertise. There are remarketing campaigns that target prospects across the Internet, mobile-specific ads and a resurgence in display advertising due in part to Facebook's popularity.
Businesses should test all possible channels to learn which ones work best for their product or service and then constantly optimize the conversion rate.
What do you think is the budget commitment SMBs need to make for internet advertising to make sense for them?
Online advertising should be based on the profit generated by an additional new sale and whether the contribution margin is appropriate for the business model.
Many factors go into determining profit and they should be rigorously measured. One issue that SMBs have is that they often don't use a "fully loaded" profit and loss statement for a particular product or service. We don't even accept advertising clients until they go through a return on investment (ROI) process with us.
As business leaders, start by asking how much it really costs to do service work for a client or to sell something. If you use freelancers or subcontractors, you should always include their direct costs, but then think about how much of your time is spent hiring, supervising and paying them. Those hidden costs can drain profits. And don't forget the costs of hiring an agency to manage the advertising or your time if you plan on managing your ads.
Our favorite client is one who says to us, "I need to return $2.40 for every dollar spent, including your fees". The numbers are important. A business leader with that level of clarity issues great direction.
Under what circumstances should a company choose an outside company or expert to support their online advertising?
The costs to manage advertising internally—especially the opportunity costs—should be compared to rates from a well-regarded agency with experience supporting your type of product or service.
We often meet smart businesspeople who have learned the tasks involved in managing an advertising campaign, but can't devote the time needed to be effective because of their other responsibilities. Most small businesses lack the time to study the ongoing market changes and manage the account. This is the worst of all possible scenarios: there is lost opportunity cost internally and there are no efficiencies gained from a well-managed agency account.
If a small business has the internal skills to manage advertising, they should only do so if they are tracking the complete cost of their campaigns and can show profit (not revenue) from the effort. Anything less than demonstrable profit means that a small business should use an agency or stop advertising.
Are there any business categories that can't benefit from online advertising?
Many businesses don't benefit from search advertising, but could still create profit from advertising directly on various sites that appeal to their prospects and customers or in other online channels.
The only time organizations don't benefit from online advertising is if they are at full capacity and buyers won't accept anything less than immediate action.
The key issue is understanding where and how to advertise online. Search advertising doesn't address every need and neither does social media or direct purchases. But there is almost always an appropriate place to advertise. What other online marketing channels have you found useful? Share your experiences with us.
George Bounacos, Silver Beacon Marketing's founder and COO, began an obsession with online businesses in the 1980s. The four startups of which he has been part have sold for a combined $96 million. While an executive at CARFAX.com, he created the company's Buy Back Guarantee program and led revenue generation from more than 20,000 businesses. Later, he managed a lead generation practice for an internet yellow pages firm. He has since launched two online businesses, including Silver Beacon, which focuses on profitability for small businesses and non-profits.
A graduate of George Mason University, Bounacos has been a Google AdWords professional for years. He judged the School of Management's undergraduate business case competition each semester for a decade and has guest-lectured in three other GMU business classes in the last two years. The Fairfax County Board of Supervisors appointed Bounacos to a three-year term on the county's Consumer Protection Commission in 2009.
Bounacos co-chaired the American Diabetes Association's Step Out fundraising walk in Northern Virginia and led social media efforts for the International Children's Festival at Wolf Trap. Bounacos and Silver Beacon donate more than 400 hours of work each year to SPARC, an organization helping Northern Virginia adults with disabilities.
Silver Beacon Marketing's clients range from small businesses that receive one million daily visits to solo entrepreneurs.