Think about online advertising and the first thing that comes to your mind is large enterprises pumping in millions of dollars in order to reach out to their customers. It might come as news to you that the first ones to adopt digital advertising were the Indian small and medium businesses (SMBs)?and not the large enterprises. This trend has escalated further in recent times. Today, various SMB?s ranging from florists, gift shops to brokers and financial advisors, find the online space ideal for investment.

A quick sampler: Today, SMBs contribute more than half the advertising revenues for the internet behemoth Google, both in India as well as globally. Among approximately 40 million SMBs globally, 2 million have an online presence in India and interestingly only half a million are live domains. The rest are under construction, inactive or just booked names.

?Though SMBs from different sectors are investing online, the biggest vertical for Google is retail comprising florists, gifting shops or electronics sold online. It is then followed by travel, financial services, educational institutions and the IT sector. These five segments get 80% of the business for Google and the rest comes from niche businesses?for instance, a guy who runs a trust in Lucknow.

Sridhar Seshadri, head online sales of Google India says, ?We reach out to 1,000-1,500 businesses everyday, but even that is not enough. My target is to reach half a million SMBs by December 2011 and we have already reached 1,00,000.? Interestingly, the SMB market is the biggest driver of growth for Google globally, but even India has shown tremendous growth over the past four quarters. It gives 27 to 28% margin to Google globally, which Seshadri says does not differ much for the Indian market.

Commenting on the growth of SMB online investment, Neville Taraporewalla, director, advertising consumer and online business, Microsoft India says, ?In the past 6 to 8 months, we have experienced 25% growth for our online advertising segment and SMB contribute a significant part of it.? He explains that over the past 12 months, he has seen SMBs expanding from just a one page website to full fledged websites with different sub sections.

Typically, the average spend by an SMB on online advertising is Rs 10,000 per month and their spending increases as they realise value for money. Take the case of Rajiv Ajmani, founder, Sunrise Consultancy Services who started http://www.fundoodata.com in 2005 and now employs 25 people. ?We started with a spend even lower than Rs 10,000 per month on online advertising. Now as we have scaled up, last year alone I spent Rs 25 to Rs 30 lakh for advertising.? He believes that the best thing about online advertising is that you get charged only when someone clicks on your ad, and reaches your website which is not the case with email marketing.

Though the previous recession-hit year compelled companies to shrink their budgets on online advertising, they are now back with a bang.

Dhruv Kapoor, VP, marketing at Carwale.com, an automative internet portal, says, ?We invested Rs 2.5 crore on advertising in 2008 and all of it was for online, brought down a portion of our advertising spend and want to spend even more than the levels of 2008 this year.? Dhruv has increased the expenditure early this year and also diversified its digital marketing from paid search to banner ads to social media. Dhruv invests equal amounts in Yahoo!, MSN and Google for advertising.

Even though the SMBs assign a budget for advertising, cost is the concern for many of them. Google strictly follows the pay-per-click (PPC) system which targets specific SMB needs. ?We start with a hypothesis that SMBs need 250 clicks a day and Rs 2,500 to play with. They should not be willing to pay more than Rs 10 cost purchase for an advertisement. We tell them to bid only Rs 10 for a set of key words,? adds Sridhar.

On the other hand, Microsoft plays on its media network strategy.

It reaches out to more than half the online population in India spread across premium third party publisher sites as well as inventory across all Microsoft brands.

It is obvious that SMBs with a strong online presence are betting big on online advertising. But the real challenge lies in bringing SMBs from various sectors online. And with customised solutions, expect the SMBs to join the online advertising bandwagon in hordes.