Over 40% of SMEs with websites use the Internet for advertising: Google India Study

Indian SMEs are reaping the benefits of using the Internet medium to grow their businesses. This was revealed by a study conducted by Google India to understand usage patterns and importance of online medium amongst the SMEs in India. As per the study, over 57% SMEs said that they now use their website as a sales channel and get direct business leads from their website.

While accessing email is the #1 purpose for using the Internet, a majority of SMEs 71% also use the Internet to search for vendors and suppliers and about 40% of them use the Internet to create online listings and advertise online. In terms of mediums used to advertise, traditional media like newspaper ads and outdoor ads still lead the advertising spends for SMEs, but Internet is emerging as one of the fastest growing medium for advertising with 58% of SMEs with websites using the Internet to generate business leads.

Amongst the SMEs who have a online presence, 56% of them feel that the Internet is a cost effective medium as compared to traditional advertising medium like print and television and 79% of SMEs believe that Internet advertising can provide greater reach. A closer analysis of the marketing spends of the SMEs reveals that SMEs with marketing spends between Rs. 25 - Rs. 70 lakhs per annum tend to spend higher on the online medium and rely less on traditional media like print and television. But majority of the spends (43%) comes from SMEs who spend between 12 to 25 lakhs on advertising on a annual basis, reflecting the low cost benefit of the Internet.

Commenting on the study findings, Sridhar Seshadri Head of Online Sales Google India said, "While the absolute number of SMEs with an online presence is very low compared to actual businesses in India, we're pleasantly surprised to see increasing understanding amongst Indian SMEs to use the web for business growth. In the last two years we have seen a significant increase in the number of businesses that have started to advertise online. But with over 35 million SMEs in the country, we have a long way to go. Google India is working on a number of programs to educate more SMEs on how they can get online and use the Internet as a primary sales channel".

"Small and Medium Enterprises are one of the key growth drivers for Google India. We undertook this study in order to understand the perception of these businesses towards online marketing as well as to identify online advertising solutions that work for them," he added.

Among all the SMEs surveyed, SMEs from Insurance, Technology B2B, IT Hardware, and Travel & Tourism spend around 30-45% on online marketing. Annual average online spends are high among SMEs from Media & Entertainment, Gems & Jewellery and Apparel. Additionally, Banner/Display Advertising and Email Marketing are the most popular form of Internet advertising and 30% SMEs use search engine advertising to market their product and services.

The respondents were also quizzed on the role that the Internet will play in the future growth of SMEs in India. 62% of the SMBs believe that the percentage of Internet spends in the total advertising budget will increase significantly in the future. SMEs from Retail, Apparel and Travel & Tourism sectors will be the biggest contributors in future and Search engine advertising and online classifieds as a category will see an up-tick across industries.

For the purpose of this study, 785 SMEs (owners or marketing heads) were interviewed across India including Mumbai, Delhi NCR, Ludhiana, Kolkata, Bangalore, Chennai, Coimbatore, Hyderabad, Ahmedabad, Surat, Cochin, Pune, Nashik and Nagpur.