Looks like the war is on. Facebook (NASDAQ:FB) laid down the gauntlet early last month when it announced its new Fit campaign. An initiative to jump-start Facebook's efforts to capture more of the potentially lucrative small business advertising market. Of course, small and medium sized businesses, or SMBs, have long used Facebook as what amounts to a free website and marketing tool.
But with some recent tweaks in Facebook's algorithms, the "reach" of organic posts -- in other words, how widely a user's post spreads -- is more limited. The answer? Facebook Fit, a series of "boot camps" held around the country designed to promote the value of social marketing, and help SMB's increase business. Good idea, considering the sheer number of SMB's nationwide is mind-boggling. Apparently, Facebook's primary digital ad competitor Google (NASDAQ:GOOG) (NASDAQ:GOOGL) thinks so, too.
What's the big deal about small business?
Small business is, by definition, small. So why would digital advertising behemoths like Facebook, and now Google, have so much interest in boosting SMB engagement? It may surprise you to learn that over half of all product and service sales in the U.S. come from the 23 million domestic SMB's, according to the Small Business Administration.
Not only is the sheer volume of small businesses worth the additional effort and focus, but there are the ancillary benefits to consider as well. There's a reason Facebook can charge advertisers what amounts to a small fortune for an ad -- some industry pundits have suggested as much as $1 million for the soon-to-be-mainstream video spots -- and why Google generated over $15.4 billion in revenues last quarter. The reason is data.
Both Facebook and Google capture, analyze, and utilize data as well, or better, than any digital alternative. So, imagine a decent percentage of those 23 million small business owners driving traffic to their Facebook or Google business portals. All that additional data is worth the concerted effort each are placing on SMB's, let alone the potential for directly increasing revenue.
The war for SMB's is on
The aforementioned $1 million video ad Facebook will reportedly charge clearly isn't designed for the small business owner. In fact, Facebook's Fit initiative offers SMB's what amounts to a starter package beginning at $10 a spot. The idea is to get small business owners into the fold, and once they see results, upgrade to more comprehensive ad solutions. Which, it turns out, many SMB's are already doing.
The timing of Facebook's and Google's renewed focus on small businesses couldn't better. A recent survey suggested over 54% of SMB's around the country have already bumped up their social marketing spend this year. Better still for Facebook and Google is why: it's working. And small business marketers are also spending more time on their respective social media site of choice.
Not to be outdone, Google has just announced its "My Business" service, which allows small business owners to connect to prospective customers across multiple channels, including Maps, Google+, and traditional search. And the kicker is Google's new service is free. Like Facebook's $10 spots, it's likely Google will attempt to up-sell SMB marketers who've begun to see some success, but it won't cost anything to get started.
Google's new business service also offers marketers analytical tools to determine how, when, and where potential customers accessed their business information. Virtual tours of an SMB's company, photos, and real-time reviews and response, round out the new, free Google business suite.
Final Foolish thoughts
Is bringing more small business owners into the fold a make-or-break proposition for either Facebook or Google? No, both are already used by many SMB's, and wisely so. However, that doesn't mean the digital ad giants don't have a lot to gain from the world of small business. This is a war worth fighting, for both sides.
Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.