Is Google to Blame for the Decline of Small Business in America?

by Andrew Landis | Founder and CEO of LuckyDiem

Starting and running a small business has always been a risky value proposition. The Small Business Administration tells us that 60 percent of them won’t make it past their first birthday.

Historically, that failure rate was eclipsed by the sheer number of new business starts each year. More businesses opened than closed — until 2008. That year, for the first time in more than 30 years, small-to-medium size business (SMB) closings outnumbered openings — and by a big margin. That year, the country was left with a deficit of roughly 100,000 small businesses. And that trend line really hasn’t reversed course all that much since then.¹

Small Business as a Share of The Economy

Source: Beyond Antitrust: The Role of Competition Policy in Promoting Inclusive Growth Jason Furman Chairman, Council of Economic Advisers

Source: Beyond Antitrust: The Role of Competition Policy in Promoting Inclusive Growth Jason Furman Chairman, Council of Economic Advisers

So what’s happening?

Well, a couple of things, from a more onerous regulatory environment to the Internet. However, despite what the headlines might have you believe, e-commerce is not responsible for what ails retail, but rather how the Internet, specifically mobile search, has enabled large businesses to co-opt the consumer’s path-to-purchase. In fact, despite how much online shopping has become a part of our daily lives, e-commerce still only accounts for about 11 percent of consumer spending in the U.S., the rest remains offline at brick and mortar establishments. Moreover, 37 percent, or $1.26 trillion of offline retail sales is influenced by the Internet.

Retal sales: online vs offline

Source: Forrester

Source: Forrester

Mobile search is It, but not for small businesses

While over 70 percent of consumers find local businesses through online search² and 4 in 5 mobile searches end with a purchase,³  only 6 percent of small businesses advertise with paid search.⁴ Again, what’s going on here? If mobile search plays such a vital role in the consumer’s path-to-purchase, why are so few small businesses using it? The short answer: Cost, complexity and lack of attribution.

The level playing field…that never was

You may recall a time when online search and its patron saint Google, were heralded as the great equalizer, enabling even the smallest of businesses to complete with global brands when it came to being discovered online. Well, that may have been true in search’s infancy, but ultimately the laws of supply and demand prevailed, turning online search and its pay-per-click model into an advertising medium that only companies with sufficient resources could afford to execute in terms of both cost and time.

Google adwords
cost per action = cost per click / conversion rate

Attribution, where art thou

Further exasperating the problem, especially for retailers, is online advertising’s lack of attribution. Despite its great promise to deliver efficiencies in delivery and measurement, online advertising, including search, still cannot accurately connect the money spent online for advertising back to retail sales. In fact, a recent survey of marketing executives by Street Fight cited online-to-offline attribution as the single greatest challenge the industry faces.

According to a report from eMarketer that came out this month, “marketers shouldn’t expect the attribution issue to be completely solved next year. The holy grail would be a perfect understanding of all the touch points, online and off, leading to a purchase."

Greatest Challenges Facing Marketers

 
 

Between its high costs, complexity and lack of accurate measurement or ROI, it’s no wonder paid search advertising is used by so few small businesses. According to an article in Inc. last year, only 3 percent of small business owners found paid search to be an effective lead generation tool. A soon to be released survey of hundreds of local merchants by Street Fight confirms that their top two pain points are SEO and paid search.

Ok, huge problem…huge opportunity, right?

Indeed, with more than 25 million small businesses in the US and a trillion-dollar market in play, solutions abound. Several startups have developed some great products, but to their detriment, in following the sage advice of “do one thing really well” they are missing the biggest pain point of small business owners—time. Survey after survey reveal that small business owners want their marketing efforts to be as streamlined and consolidated as possible. Even the strategies from some of the largest companies in the space such Facebook and Yelp continue to “lose the support of small businesses…with their core business offerings not working for them.” 

 
 

The small business market has always proven a challenge to sell into for service providers. Business owners barely have the resources to manage the core needs of their business such as staffing and inventory. Marketing is a luxury that few small businesses can afford—both literally and figuratively.

A comprehensive and simple solution emerges

LuckyDiem is a New York-based startup that has built a platform that completely removes time and money from the digital marketing equation. The company provides businesses with a turnkey marketing platform that includes mobile search, variable promotions, social media and even a gamified customer loyalty program. The platform takes less than five minutes to setup, and businesses don’t have to add any new hardware or software to their operations.

De-risking digital marketing

The company’s business model is 100 percent pay-per-sale which means businesses only pay LuckyDiem when customers pay them. For retailers, this is the first a time they’ve ever had a digital marketing solution that is completely turnkey and guarantees full online-to-offline attribution. The holy grail of marketing that industry pundits say is years from reality appears to be happening a lot sooner than they thought.

Make it fun and rewarding

For users, LuckyDiem offers two things consumers love—gaming and savings. To that end, all of LuckyDiem’s business listings integrate instant prizes and discounts that can be increased through game-based engagement. These upgradable rewards serve two purposes that on the surface seem paradoxical: Giving consumers discounts while improving margins. LuckyDiem is able to accomplish this through the application of behavioral economics’ endowment effect which the company has proven through its campaigns for national brands to effectively manipulate the consumer’s perceived value of a reward, ie, a 10% discount felt like 20% or more.

Finally, through gamification, LuckyDiem provides businesses with a free, yet powerful customer loyalty program that sustains the consumer’s engagement that was first initiated through search. Moreover, since LuckyDiem’s platform turns any retailer into a closed-loop system, the company enables businesses to identify and reward their best customer not just on the value and frequency of their own purchases, but on their social influence as well.

A Quick Comparison of Search and Marketing Platforms

 

LuckyDiem is no doubt an ambitious initiative in both the breadth of its offering as well as the size of the market it seeks to serve. To date, no one company, not even Google, has developed a marketing solution that efficiently or cost effectively works for small business. LuckyDiem’s holistic and risk-free platform is potentially a game changer for the digital marketing industry, and can hopefully serve as a catalyst for small business to once again thrive in America.

Sources

  1. Solving Retail’s Small Business Crisis by Karen Webster, PYMNTS, February 13, 2017

  2. Local-Search-Association, 2016

  3. comScore, 2016

  4. Manta Research, 2017