Facebook, Twitter and other forms of social media are catching up to traditional websites as a marketing mechanism for small businesses. That's the takeaway from a just released survey of 2,000 small businesses by research firm Internet2Go. That could be bad for Google (GOOG), which has a virtual monopoly on small-business online advertising, and for Adobe (ADBE), which has a real monopoly on software tools used to build websites.

According to the survey, which ran in mid-September 2009, 45 percent of small-business owners have Twitter or Facebook accounts. That's astonishing considering that today only 44 percent of all small businesses have websites, according to some surveys. Remember, the Internet is over a decade old, but social media is really only two to three years old, if that."We've known anecdotally that small businesses are using social media sites like Facebook and Twitter, but these numbers are surprising," says Greg Sterling, an Internet2Go senior analyst.
What's going on here? First, the survey covered small companies that are active online, so they're more likely to be early adopters. But I believe something deeper is happening. Plainly put, social media offers most of the benefits of a website with few of the headaches.

Business owners can easily float offers on Twitter that are quickly searchable. They can also easily interact with their customers and spot trends that could be useful in marketing. Facebook's small-business users can build a fan page that provides most of what they get with a standard brochure website, but at a tiny fraction of the typical $500 cost. Contrast that to building a website. You can either do a very cheap one that costs $50 to a few hundred -- and looks like it. Or you can pay at least $2,000 to have a designer build one for you that's really good and includes a minimal amount of functionality.

Then you need to deal with a content management system to update the site, hosting costs and other time-sinks. "biggest complaint" small businesses had regarding online marketing was that it was "too costly" (26 percent). In the survey, 80 percent of the companies reported having marketing budgets of less than $5,000. Of course, the difficulty small business has with traditional websites is no secret. Google, Local.com, MerchantCircle and numerous other companies offering online marketing services to small businesses provide simple online placeholders that contain key company information and can serve as landing pages for online ads.

That said, 90 percent of survey respondents also had their own websites. Also, respondents didn't claim to be overly satisfied with social-media marketing mechanisms versus other types of online marketing.

And a competing survey by Citibank found the opposite result: that small businesses are largely uninterested in social media. (Of course, that was a telephone survey, and you know how Twitter and text users feel about actually picking up the phone.) Therefore, the jury is still out.

I personally think that verdict will come in shortly -- and social media will be a big winner. In doing research into Facebook advertising, I tracked a small but growing number of small businesses that were skipping websites entirely and going exclusively with Facebook, Twitter or some combination of the two for online marketing. Others just put up blogs rather than websites and used that as their web presence.

In fact, Sterling himself is a case study. He became self-employed several years ago and started to build a website. He had problems finding a designer he liked at a price he was willing to pay, so he launched a generic WordPress blog instead. Now that blog has become a key part of his online presence, and Sterling has no interest in building a site that costs a lot upfront and requires serious care and feeding.

So what does this mean? For Google, which has long held a hammerlock on Internet advertising, this could mean far more competition for marketing dollars as social-media marketing grows in acceptance and begins to encroach on text-based search advertising and display-based contextual advertising.

Google beat Wall Street's earnings estimates on Thursday and wowed analysts with 14 percent year-over-year growth in search-based advertising. But that growth is very low compared to several years ago and suggests a rapidly maturing market in Google's search-ad stronghold.

For companies that make software tools to build websites, such as Adobe, the message could be even more dire. The death of the pretty-but-useless brochure website may be close at hand. That means less work for Web designers catering to small busineses and less demand for Adobe's expensive site-building tools. But for small businesses, it creates a more level playing field and lower barriers to entry to online publicity and marketing.

Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at alex@dailyfinance.com.


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