Small Businesses That Use The Internet Have Larger Market Shares

A study of over 1700 small and medium businesses (SMB) finds that those with owners who have deeper Internet involvement have greater market share than companies with less web-savvy owners. The study was conducted by American City Business Journals (ACBJ) and released by its affiliate Portfolio.com. Leading applications used by SMB owners are travel planning, researching and buying business products and services, accessing business news and keeping in touch with friends and colleagues.

Surveyed were companies of between five and 499 employees, with about three-quarters having five to 20 employees. The study indicates that technology and the Internet not only play a critical role in business, but also greatly impact their personal lives. For example, 73% reported that technology makes their lives more organized. Jessie Shaw, Deputy Director of Research for ADBJ observes, “The more Internet-engaged SMB owners have a technology mindset that trickles across all aspects of their lives. They feel that their technical acumen and product usage reflect the type of businesspeople they are.”

According to the report, participation in social networks grew from 38% in 2009 to 58% in 2010 for this population with an average age of 50. While 49% use SMS, only 10% participate on Twitter. This leaves the impression that the respondents feel the promise of social networks for business applications has not panned out. Only 15% of the respondents say they use social networks only for business purposes, while 35% say they use it for only personal purposes and roughly half say they use it for both.

Five distinct categories of unique Internet usage behavior by SMB owners are identified: Interactors, investors, transactors, commentators and viewers. The study found that companies headed by interactors, investors and transactors have an edge resulting in improved market share.

Interactors are the most heavily engaged with the Internet, spending 2.5 hours per week (not including reading/writing emails), the highest amount of time of all the segments. This group represents a fairly small group of business owners (15% of the survey population, accounting for 24% of sales) who are mostly well-educated men and tend to run larger companies compared to any other SMB segment. By being highly engaged with technology, they have armed their employees with wireless devices, and are more inclined to make purchases over the Internet. Of all the groups, they are most likely to be frequent travelers.

Investors represent 22% of SMB owners and 23% of sales. The Investors group consists primarily of men who are on average 53.6 years old, have completed degrees in higher education and the highest household incomes They show moderate engagement with the Internet and are most inclined to use it to access general and business news and manage their investment accounts, but are less active in the social networks realm.

Transactors are the highest segment of Internet sellers and sell the most products and services over the Internet – 50% versus 41% for all other SMB owners. They are less inclined to use the Internet for investing, banking and making travel plans. In most cases, transactors run well-established companies and have a tendency to be found in urban and/or suburban areas that skew toward the Northeast. They account for 25% of business owners and 29% of sales.

Commentators and Viewers, differ from the other three in a significant way – they account for the least percentage of sales. Viewers make up 21% of the survey population, yet account for only 10% of sales. 17% of business owners are classified as commentators, but this segment accounts for 14% of sales.

Viewers are those who make the most of the web’s multimedia offerings by consuming more music, entertainment news and sports – own the smallest companies, with an average of 21 employees and work the fewest hours of 51.7 hours per week. They also spend the fewest hours on the Internet – 2.1 hours per week – and when using the Internet, they spend their hours on blogs, YouTube, etc.

Commentators work the longest hours, 55.2 hours per week, and they represent a higher percentage of women- and minority owned businesses than the other segment. Commentators, who spend the most time working on their own blogs or posting responses to others, work out of the office the most but use the Internet the least to buy or sell businesses and services.

Join Baratunde Thurston (left), The Onion’s Director of Digital and author of How to Be Black, for an entertaining look at creative social media campaigns in our Social Media Marketing Boot Camp starting February 16. Other speakers include Morin Oluwole (Facebook), Tim Devane (bitly), and SocialTimes' writer Devon Glenn.   Register now.