Small business advertisers are investing more money in online advertising even though overall advertising budgets have been reduced, a recent report has shown.

The latest edition of the Local Commerce Monitor study by The Kelsey Group and ConStat has revealed that while small businesses have spent less overall on advertising than this time last year, they have increased their spending on online/digital advertising in the past year. In fact, for the first time ever, online media has overtaken traditional media in the way that small businesses are choosing to invest their advertising funds.

According to the report, small and medium-sized businesses (SMBs) in the US decreased general advertising spending by 23.5% from August 2008 to August 2009. Of the total advertising undertaken by SMBs, online advertising rose from 22% to 36.8% over the same period. Over 300 SMBs were surveyed in total.

The overall reduction in advertising expenditure can easily be attributed to the ongoing economic downturn, with businesses worldwide trying to cut unnecessary costs and limit their spending.

So why the big increase in online marketing?

Apart from the ever-growing popularity of the Internet, particularly in Web 2.0 and social media platforms such as Facebook, Twitter and YouTube, many avenues of online advertising can be tracked for increased value. For instance, Pay Per Click (PPC) advertising campaigns can be reviewed and amended according to their level of success, providing the advertiser with more flexibility and assurance in how they spend their budget and how their adverts are seen by their target market. Organic Search Engine Optimisation (SEO) may be more of a long-term strategy, but it, too, can be monitored in order to analyse its worth and success. In any case, observing prospects and conversions is certainly easier to manage through online advertising than through other mediums, such as print or television advertising.

Incidentally, the report found that in the last twelve months, more SMBs are using PPC and SEO as part of their online marketing campaigns. With the large increase in online advertising spending and with BBC News reporting today that the current recession may finally be coming to a welcome end in the UK, it will be interesting to see the progress and presence of online/digital marketing twelve months from now.