• by Mark Walsh  @markfwal, March 17, 2009

Spending by small- and medium-sized businesses on "non-advertising" marketing will more than triple over the next five years to $1.63 billion as local companies pour money into building out their Web sites and other promotional efforts online.

That forecast by Borrell Associates, in a new report titled "Main Street Goes Interactive," predicts that interactive ad spending--across segments including display, search and email--will grow more slowly, by only 10% in the next five years to $7.5 billion.

While non-ad spending has been only a small fraction of SMB interactive marketing budgets to date, Borrell expects that to change as the Internet increasingly erases the distinction between advertising and marketing.

"The blurring borders between what is advertising in the interactive world and what is not added to the shift of 'non-ad' marketing dollars," states the report. "Businesses large and smaller--but especially smaller ones--don't even try to make the distinction. To them, whatever they spend or do on the Web is advertising, whether it goes through an intermediary or not."

That mindset will help non-ad spending on things like Web sites or online promotions or public relations efforts increase from 7.9% to 18.1% of interactive marketing budgets from 2008 to 2013.

On the advertising side, Borrell anticipates that paid search will continue to be a key part of SMB spending while banner ads give way to video. "By 2013, the spending habits of SMBs are likely to be very different than today, when their interactive buys consist mainly of paid search (accounting for 85% of online advertising)," according to the study. "In five years, 68% of their spending will be on paid search and video."

Meanwhile, standard format advertising, which today accounts for 47% of all SMB interactive spending, will make up less than 19% by the end of 2013. Citing a B@B Magazine survey, Borrell noted that only one-third of marketers interviewed planned to increase spending on banners in 2009, while more than two-thirds expected to boost spending on email marketing.

Along with other studies, "these surveys and other research indicate that media planners from businesses of all sizes do not believe the classic 'standard format' interactive ad format performs as strongly as other formats--specifically email marketing and paid search," stated the Borrell report.