Facebook, Inc’s Effort to Capture Small Business Market Paying Off

Earlier this year, the social king made a concerted effort to bring more small businesses into its advertising fold, and it’s working.

Tim Brugger
Tim Brugger
Oct 9, 2014 at 4:00PM
Technology and Telecom

Despite what appears to be some near-term, upside resistance, Facebook (NASDAQ:FB) shareholders have enjoyed a banner year. But even with its stock price jump of about 42% year-to-date, Facebook is hardly sitting idly by and patting itself on the back. Multiple acquisitions, testing of new advertising formats like video and in-app ads, are just a few of the steps Facebook CEO Mark Zuckerberg and team have been focused on of late.

With all the headline news Facebook's been making this year, some investors may have overlooked its focus on capturing additional advertising revenues from the millions of small business owners in the U.S. For a digital ad king that reportedly is able to charge a whopping $1 million a day to just test video spots, some may wonder why Facebook would take the time to focus on small and medium-sized businesses, or SMBs, at all. There are several reasons, and Facebook investors should thank Zuckerberg and team for their SMB efforts, because they appear to be working in a big way.

Getting Facebook Fit
Earlier this year, Facebook announced its new program dubbed, "Fit." The targeted boot camps, according to Facebook , consists of five gatherings designed to help SMB's get the most out of their online marketing efforts. Not surprisingly, many business owners already have a page devoted to their respective companies, but Facebook is hoping for more.

Having an "active" Facebook page is only part of the marketing equation for SMB's as far as Facebook is concerned. Showing the small business owner how, and more importantly, why, they should consider spending at least part of their respective marketing budgets on Facebook ads is what the Fit boot camps were all about. If the first Fit gathering in June with its 1,000 attendees, and recent data on the SMB ad market that Facebook commands are any indication, Fit and efforts like it are paying off.

Small business is a big deal
According to a recent study, over 55% of the SMB's surveyed said they have a dedicated page on Facebook for their business, which easily outdistanced the likes of Twitter (NYSE:TWTR) as a social media marketing outlet. Of the 55% of business owners who have a Facebook page, 20% said they have also bought advertising. Now, that may not seem like a lot, but with Facebook's size, those numbers begin to add up.

To put that into perspective, Facebook said it has an estimated 30 million businesses with active pages, up from a "mere" 25 million less than a year ago. Of those, about a million buy ads each month. So, what's the big deal about a million mom-and-pops buying spots monthly? Scale.

One of the SMB's who attended the first Fit workshop in NY is an ideal example . His monthly marketing budget is only $250, but he spends every last dollar of that to advertise on Facebook. When you multiply that times a million SMB's buying spots, each month, you can see why investors should be thankful Facebook hasn't let small businesses slip through the cracks.

Hey, that's a good idea
It wasn't long after Facebook began hosting its Fit boot camps that social media upstart Twitter caught the SMB bug. A couple of months ago, Twitter took the wraps off a new ad payment tool that gives small business owners an opportunity to plan their ad campaigns months in advance , and select from a host of payment alternatives; including pay-per-click and the number of site visits that result from an ad view. If Twitter's new-ish ad payment solution sounds familiar to Facebook fans, it should: Facebook's offered its marketing partners a similar feature for some time now.

Final Foolish thoughts
The greatest benefit to SMB's to advertise on Facebook, as well as the biggest difference between it and social media alternatives like Twitter, is having access to its treasure trove of user data. Using all that information, no one can target ads like Facebook can. For the small business owner, gaining access to that much data, let alone knowing how to analyze and implement it, would be next to impossible, not to mention incredibly expensive.

Facebook is already winning the small business ad war among its social media brethren, which is good news for shareholders, and for SMB's, because it works. The even better news is "only" one million of Facebook's current 30 million business owners with active pages are currently advertising on its site. That's a lot of upside potential, and with Facebook's targeted efforts to bring even more SMB's into the fold, you can bet increased revenues will follow.