What % of small businesses are online– some statistics

Tricky question, so let me answer it this way:

To measure penetration, we need both the numerator (number of businesses that are using IYP, traditional YP, and BBB)– divided by the denominator ( number of locally-focused businesses).

For the denominator: the traditional number bandied about at tradeshows for local biz in the US (I’m assuming you’re looking at just US for now?) is 16-23 million businesses. However, that’s a highly distorted number, since that includes “hobby” businesses– grandma selling her custom-woven socks and various part-time employment (MLM, eBay sellers, affiliates).

If you go by US census data, there are 6 million firms in the US and 7 million establishments (to account for multiple locations for franchises). Cut that down to the folks who are actually advertising in the yellow pages and you’re about half that.

Now cut out services that aren’t truly local (in my personal opinion), such as insurance or anything affiliate-related. You’re down to under 2 million.

Cut out restaurants and nail salons and you are left with 700,000— primarily professional service firms who have at least $250k in annual gross revenue and have at least 1 full-time employee.

This is the bread and butter of the yellow pages– dentists, car dealerships, restaurants, and attorneys. Net-net, depending on whose numbers you use for a numerator or denominator, you get IYP (Internet Yellow Pages) penetration of between 10 and 20% for claimed listings and traditional YP penetration of about 50%. I asked Greg Sterling and off the top of his head, he said the 50% figure was about right.

I’ve asked folks at the BBB for their stats since the latest I see is a few years old– will update you when I hear back.

Thus, be very wary of the source of any stats you hear– there is incredible bias, depending on the industry role:

  • The YP folks (whether YPA or Yptalk) like to say the yellow pages are not dead, but are actually holding flat at 84% usage by consumers and $30BN in annual revenue.
  • The tree huggers like to say the YP folks are dead in a few years– also an overstatement.
  • Then you have industry pundits who will write favorable reports about your company if you pay them a few thousand dollars (Clickable being the most egregious example).

So if you’re looking to sell software products that are under $50 a month, then you have 20 million potential businesses in the US alone, most of which don’t have websites or even enough money to do any more than sign up for a $10/month hosting package for a cookie-cutter site.

But if you are selling as an agency to local businesses that have $2k a month to spend online, then perhaps you have 500,000 firms to go after– the majority of which have websites and are doing some form of online advertising.

So don’t let statistics get in the way of the point you’re trying to make!  After all, there are lies, damned lies, and statistics.

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