Advertising Small Businesses Online

There was an interesting article on Search Engine Land today that I thought I would reference and comment on.

The article entitled: How Much Are SMBs Spending On Online Advertising? talks about both the average spend of specific vertical industries.

They looked at tier two industries, specifically jewelers, hair salons/barbers, spas/beauty salons, and health/fitness clubs. Let me know if you know the difference between a hair salon and a beauty salon. Maybe you can get your manicure at a beauty salon and can't at a hair salon?

What you'll see from their graph is that the average spends across all of the verticals is something less than $60 per month. This was a shocker to me as we typically see average spends north of $300 per month. At $60 per month I have to wonder what kind of results they see. Both positioning and the number of days on rotation have to be nearly invisible based on the conversion rates that SEM typically sees, not to mention banner ad CTRs. Let's imagine you can get a $0.50 CPC, 120 visits and a 2% conversion rate, can those two new customers pay for the advertising?

For these industries I can see it making a difference in terms of customer acquisition cost vs. lifetime value. Jewelry is a big hit up front, with high margins; hair salons, barbers and beauty salons that do a good job can retain customers for quite a long time and health clubs typically get 6 month or a annual memberships; so I can see how those two customers per month can have high profit margins.

I know I've ignored things like churn and retention rates, but I highly doubt that the average beauty salon is thinking of it either. What I hear from clients and prospects is typically "it works" or "it doesn't work", with a small percentage living the branding dream and saying, "Hey, I just want to be out there".