• by Jack Loechner , Staff Writer @mp_research, June 28, 2011

According to MerchantCircle, new local ad offerings from Facebook are making inroads with local merchants and may put increasing pressure on Google and pure-play deals companies such as Groupon for share of local marketing budgets. With its huge consumer adoption, ease-of-use and low barrier to entry, Facebook continues to be the most popular digital site for merchants to market their business, though, overall, 66% are using the social network for marketing.

The survey shows 22% of local merchants have used Facebook Ads, two-thirds would use again and show increasing favorability towards group deals, with 77% now saying they would offer another daily deal.

Darren Waddell, vice president of marketing at MerchantCircle, says "Facebook...  has established (itself) as an important marketing channel for local businesses... and is effectively parlaying this popularity into local ad sales..."

Key conclusions from the survey include:

1. Facebook continues to be the most popular way for merchants to market their business, with 66% overall using the social network for marketing. Facebook's targeted display ad offering boasts a remarkable 94% awareness rate among local merchants.

• 22% of merchants report having used Facebook ads since its launch
•  65% of these merchants say that they would use the service again
• 67% say because of ease of use
• 65% say the top reason for continuing is the ability to start and stop campaigns

Reason For Using Facebook Ads Again
Reason	% of Respondents
Easy to use	66.5%
Pause according to budget	64.8
Ads are well targeted	53.7
Good for acquiring new customers	49.3
Source: Q2 2011 MerchantCircle Survey, June 2011

However, of the 35% of merchants who said they would not advertise with Facebook again, 69% said that the ads did not help them to acquire new customers, and 35% said the ads were too expensive.

2. The study indicates that familiarity with Facebook and Google will make these well-known brands a strong alternative to Groupon and LivingSocial, with 52% saying that familiarity with these brands would lead them to choose Facebook Deals or Google Offers over competitive offerings. Other reasons for choosing:

Facebook

• Bigger audience size (26%)
• Better local targeting (21%)

Google

• Bigger audience size (42%)  
• Brand reputation (34%)

3. While three months ago, only 50% of merchants who had tried offering a group deal said they would do so again, 77% now say they would be willing to offer another daily deal, 58% citing effectiveness in customer acquisition, 30% favorable deal structure, and 24% profitability of the deal as their top three reasons.

Among those who wouldn't offer another daily deal, 42% said that it was not effective in customer acquisition, 25% said it was too costly and 24% said they lost money.

Mixed opinions about the medium's effectiveness for customer acquisition may be contributing to its slow growth among local merchants. This is not for lack of aggressive sales and marketing efforts, notes the report. 34% of respondents who offered a daily deal did so after being contacted by a sales rep, or 31% seeing an ad for the service.

4. Investment in traditional offline marketing methods continues to decline among local merchants. Over the past three months:

• Use of print advertising dropped from 27% to 24%
•  Use of print Yellow Pages declined from 37% to 29%
•  Use of direct mail decreased from 28% to 26%

The popularity of location-based marketing services has also dropped over the past quarter. Data shows that 22% of businesses are using Facebook Places to market their business, while just 7% are using Foursquare. This is trending downward from the last survey in January 2011, when 32% said they were using Facebook Places and 9% said they were using Foursquare.

Promoting Business With Websites/Services (% of Respondents)
Site or Service	% Promoting
Facebook places	22.3%
Bing	22.2
YouTube	18.7
Yp.com	17.9
MySpace	9.8
Ask.com	8.5
Foursquare	7.3
Groupon	4.3
Living Social	3.6
Source: Q2 2011 MerchantCircle Survey, June 2011

In spite of the hype around mobile marketing, just 18% of merchants report doing any sort of mobile marketing or advertising. Lack of understanding continues to be a major barrier to adoption: 71% of merchants state that they don't have a good idea of how to reach consumers via mobile marketing. Additionally, only nine% said they own a tablet, with 9% said they planned to buy one in the next six months.

5. Local merchants continue to have little time or money for marketing. 61% of local merchants are spending less than $2,500 a year on marketing, and 73% have no plans to raise their budgets this year. Time is also a critical issue for merchants, with 37% citing lack of time and resources as their top marketing challenge.

Please visit MerchantCircle here for additional information.