Owners are using the web to search for goods but not placing their own ads.
Half of small businesses spend less than 10 percent of their marketing budget online, even though 63 percent of those small business respondents look online first themselves when seeking local products and services, according to a recent survey by Nielsen Online.
"There's a huge disparity between how local businesses perceive online advertising and how they're executing," said Kevin Ryan, chief marketing officer at WebVisible, a web advertising firm with 100,000 small business clients and sponsor of the study.
The survey was conducted online with 4,000 respondents, including 261 self-identifying small business owners. Titled "The Great Divide," the study paints a dire picture for small businesses that don't nurture their online presence.
"If (consumers) don't immediately find what they're looking for, they'll go elsewhere for it," Ryan said of online searching. "If you don't have a presence, you're handing your business over to the competitors in your space."
Atif Rafiq, head of local advertising for Yahoo! in the United States agrees that up to a quarter of searches have local intent.
"What we're finding is user behavior has shifted from the yellow pages to the web search," Rafiq said. "If users are there, then that's where local advertising needs to happen."
Mom-and-pop businesses should start by making sure their Yahoo! listings are accurate, a move Rafiq described as a no-brainer.
Not everybody selling online ads agrees that small businesses are woefully behind the times in the web ad game.
In California, small business owners are active online ad buyers, according to Kevin Garrity, the interactive sales manager for McClatchy's Sacramento Bee, who also sells ads for the search site Sacramento.com. Together, Garrity says the Sacramento sites have about two million unique visitors a month, making them one of the top news sites in California.
"We're seeing more and more of our small and mid-sized retailers that are more savvy online, and they're allocating more of their advertising budgets to that medium," Garrity said.