Greg SterlingVP, Strategy & Insights, Local Search Association

MOBILE: READY – OR NOT?WHY SMALL BUSINESS MUST ADAPT NOW TO THE MOBILE-FIRST CONSUMER MARKETPLACE

January 2016

Commissioned by

Small business is the driver of job creation in the US economy. Over the past decade and a half small businesses (SMBs) have been responsible for more than 60% of all job growth. That’s why it’s worrisome that a large percentage of SMBs are not keeping pace with changes in the market and consumer behavior.

As consumers have embraced smart-phones and the mobile internet, SMBs and even enterprises have lagged behind. BuzzBoard, which commissioned this report and provided some of its data, found that roughly 47.3% of all SMB websites across the US are not mobile ready. Other data sources show even larger numbers unprepared. Not waiting for businesses to catch up, consumers have embraced mobile search and apps as primary tools to find local business information.

According to Google there are now more search queries coming from smartphones than desktop computers. This is particularly true when it comes to local business lookups. It’s a major milestone—a point of no return—that holds significant implications for SMBs

and their communities.

Mobile represents an existential threat to SMBs that fail to adapt. That’s be-cause consumers increasingly reject websites that aren’t optimized for mobile devices and will seek out mobile-ready competitors. In these moments of decision, sales are lost and opportunities missed. Accordingly the time is now to

build a mobile presence or upgrade an ineffective one.

This report documents the accelerating consumer shift to mobile search and the mobile internet. It also makes tactical and practical recommendations for busi-ness owners in the process of getting mobile ready.

Greg SterlingVP, Strategy & Insights,

Local Search Association

Executive Summary

Over the past decade and a half small businesses have been responsible for more than 60% of all job growth.

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Table of Contents

Executive Summary .............................................................................................................2

Small Business is Critical to the Economy ..........................................................................4

Figure 1 - Distribution of Firms by Headcount .....................................................................4

Slow Response to Mobile Shift .............................................................................................5

Figure 2 - Average number of channels SMBs use to promote themselves .......................5

Serving the Mobile-First Consumer .....................................................................................6

Figure 3 - Desktop vs mobile users ......................................................................................6

Figure 4 - Mobile used more often for local information .....................................................7

Figure 5 - Most email now opened on mobile devices .........................................................7

SMB Mobility Growing but Uneven .......................................................................................8

Figure 6 - Mobile friendly sites win under Google’s new algorithm ....................................8

Figure 7 - Top five mobile-ready US cities ...........................................................................9

A Mobile Site is Not Enough ..............................................................................................10

Figure 8 - SMBs’ perceived obstacles to creating a mobile site ........................................10

Figure 9 - Transactional capabilities increasingly sought by mobile users ......................11

What about Mobile Apps? ...................................................................................................12

Figure 10 - 90% of time spent with mobile apps ................................................................12

SMB Mobile Checklist .........................................................................................................13

Conclusion: Not if but When ...............................................................................................14

The US government technically defines a “small business” (SMB) as one with fewer than 499 employees. As indicated, however, the vast majority of SMBs are concentrated at the lower end of the headcount spectrum.

Despite their size, SMBs in the aggregate play a major role in the economy. Over the past decade and a half SMBs have been responsible for more than 60% of all job growth and, as of 2012, they employed roughly 50% of the nation’s private-sector workforce according to US government data.

SMB success is therefore critical to the health of the overall US economy. But the accelerated pace of technology change has created a massive challenge for local business owners. While digital media are often said to “level the playing field” for SMBs, the shift from traditional to digital marketing has generally intro-duced greater complexity and confusion.

Gone are the days of “set it and forget it” advertising. Digital marketing must be constantly tested and optimized, which can be done by outside agencies or dedicated employees provided there are resources to pay for those services.

According to the US Small Business Administration (SBA) there are just over 27 million “firms” in the United States with 19 or fewer employees. In fact, about 81% of these firms have no employees; the majority are self-employed individuals.

Small Business Is Critical to the Economy

Figure 1: Distribution of Firms by Headcount

Non-employer firms

1 to 4 employees

5 to 9 employees

10 to 19 employees

20 to 99 employees

100 to 499 employees

500+ employees

21,069,000

Source: US Census Bureau (2013); a “non-employer” firm is one that has no paid employees

3,617,764

1,044,065633,141 526,307 90,386 18,469

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The majority of SMBs are left, however, to struggle with some version of self-service – although many are naturally inclined toward self-service.

According to 2015 Local Search As-sociation (LSA) data, SMBs now use an average of seven marketing methods to promote themselves. This illustrates the complexity of marketing today, as new methods and channels emerge. In this environment trying to determine “what’s

working” and where to allocate budgets have become major challenges.

SMBs are now called upon to understand and manage marketing across an array of channels: search, social, email, reviews, video, display – and mobile. National brands also struggle with many of these same issues; however they have greater internal and external resources to deploy.

Figure 2: Average number of channels SMBs use to promote themselves

Slow Response to Mobile Shift

2013 2014 2015

66.6

7.2

Source: LSA-Thrive Analytics (February 2015)

The most disruptive event to occur in digital media since the arrival of Google was probably the introduction of the iPhone in 2007. We’re now eight years into the smartphone revolution, yet most marketers have not caught up to their customers. Even today a large percent-age of Fortune 500 companies still don’t have mobile-friendly websites.

It comes as no surprise that large numbers of SMBs are not mobile ready either. Research reveals differing levels of mobile preparedness. For example, a mobile presence analysis performed by BuzzBoard found that 47.3% of SMBs in the US do not have mobile-ready web-sites. Financial firm RBC Capital Markets found a much smaller number of mobile ready SMBs. According to the firm’s 2015 survey only 33% of SMB websites in the US are mobile ready. Regardless of which number is more precise, they both

reveal large numbers of SMBs do not have a mobile-friendly digital presence.

Having an effective mobile presence is now critical for all merchants, but especially for SMBs that sell offline, which describes most local businesses. That’s because, as indicated, mobile has become the primary platform for con-sumer local search behavior (Figure 4).

SMBs (or enterprises) that aren’t mobile-ready are at immediate risk of losing visibility and sales to better-po-sitioned competitors. Their reputations are also vulnerable to negative reviews from frustrated consumers. For these and other reasons it’s incumbent upon SMB-focused government agencies, non-profits and private entities to help them make the jump to mobile as quickly and effectively as possible.

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Serving the Mobile-First Consumer

It goes without saying that consumers have enthusiastically embraced smart-phones. Google recently reported there are more than 1.4 billion Android phone users globally. Apple has sold more than 700 million iPhones. We can therefore estimate that there are probably nearly 2 billion smartphones in use around the globe.

When the original iPhone was released in 2007 it was regarded as an expen-sive and frivolous toy for tech “early adopters.” Today if you don’t have a smartphone you’re practically a social

outcast. It’s not simply a fashion state-ment; smartphones are now the primary Internet access device for millions of people.

Over 77% of mobile phone owners in the US now have smartphones, according to research firm comScore. The percent-age is even higher for Millennials, those between 21 and 34 years of age. And by early 2016 smartphone ownership is projected to exceed 80%. The Pew Re-search Center also recently found that in the US nearly 90% of adults under 30 own a smartphone.

Figure 3: Desktop vs mobile users

Total United States population

US internet users

US mobile subscribers (approx.)

Smartphone ownership

Source: comScore, US Census Bureau (September 2015)

319 million

257 million

250 million

192 million

As smartphone screens have grown larger, mobile devices have taken on a leading role in consumer decision-mak-ing at every stage of the “path to pur-chase.” While we live in a multi-device world, smartphones and tablets are now the primary ways a large percentage of Americans access the Internet. This is not to say that they no longer use desk-top or laptop computers. But desktop usage is flat-to-declining.

According to comScore’s recent “Global Mobile Report,” just under half (49%) of the traffic and visitors to the top 100 digital media properties are mobile

only. This is a remarkable statistic that argues websites not adapted for mobile devices may risk losing half their audi-ence.

While there’s been no comparable study of traffic to SMB websites, as already indicated, mobile devices are respon-sible for more searches than desktop computers. In October, Google said that mobile searches now exceed 50% of queries on a global basis.

When it comes to local business lookups and category searches, smartphones and tablets are even more out in front of

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Figure 4: Mobile used more often for local information

Figure 5: Most email now opened on mobile devices

Source: LSA-Thrive Analytics consumer surveys 2014 - 2015

desktop or laptop computer

smartphone tablet

49%

40% 42%

49%

9% 11%

Device most commonly used when looking for location information online.

2014 2014 20142015 2015 2015

desktops. As the survey data in Figure 4 illustrate, mobile devices are more com-monly used by a majority of consumers (60%) to find local information than desktop computers (40%). In addition, these mobile consumers are often closer to a purchase decision than those on the desktop, because their needs are generally more immediate. Data from a recent Google-sponsored study reflect that 50% of people conducting local searches on smartphones tend to visit

a store or business location that same day or the next day, though it varies somewhat by category. Beyond this, 18% of local-mobile searches lead to a purchase within a day. Mobile users are clearly “ready to buy” consumers.

Google also reported searches that include the phrase “near me” (or an equivalent) had grown 34X since 2011 and nearly doubled since last year. As of late 2014, more than 80% of these near-me searches were from mobile devices.

10+2+42+32+14Source: Movable Ink Device Preferences Report (August 2015)

32.22%desktop

41.97%phone

14.43%ipad

9.72%android phone

1.68%other mobile

Further evidence of the tectonic shift toward mobile is shown with email. Roughly 68% of all emails are now read on smartphones or tablets. In other words, only one-third of emails are opened on traditional computers. In fact, email is being read more often on iPhones than on desktop computers.

Email not readable on mobile devices will generally be ignored or deleted. Similarly, a majority of people who encounter websites that aren’t mobile-ready will abandon them or seek alter-natives.

Sterling Research and SmithGeiger surveyed more than 1,000 US smart-phone users in July 2012 (on behalf of Google) and found that, even three years ago, consumers were highly critical of non-mobile-friendly websites. Indeed, a majority said that they wouldn’t tolerate

bad experiences on mobile:

• 61% of users said that if they didn’t find what they were looking for right away, they’d quickly move on to another site

• 79% of people who don’t like what they find on one site will go back and search for another site

• 50% of people said that even if they like a business, they will use them less often if the website isn’t mobile-friendly

In contrast to these negative attitudes, survey respondents had positive views of sites that performed well on smart-phones. Nearly three-quarters of those surveyed (74%) said they were more likely to revisit mobile-friendly sites; 67% said they were more likely to buy after a visit to a mobile-friendly site.

SMB Mobility Growing but Uneven

Google is focusing increasingly on serving mobile users as the company’s primary audience. In an unprecedented move to motivate mobile-site adoption, Google pre-announced a change to

its search rankings to reward “mobile friendly” websites with more visibility. In the language of search-engine opti-mization, Google made mobile sites a “ranking factor.”

Figure 6: Mobile friendly sites win under Google’s new algorithm

Source: Duda, August 2015

Average weekly traffic pre-Mobilegeddon

Number of sites in traffic range

Average traffic growth post-Mobilegeddon

100-200 1879 13.6%

200-500 1664 11.2%

500-1000 667 5.3%

1000+ 545 6.7%

All 4755 10.8%

Mobile-friendly sites are identified as such in search results; those that are not are less likely to appear on the first page of Google mobile search results.

The move was seen by some as heavy handed, effectively compelling site owners to adapt to mobile audiences. Yet it appears to have worked and suc-cessfully motivated a large number of brands, publishers, retailers and others to redesign their websites for mobile users.

Following the rollout of Google’s “Mobile Friendly Update” in late April of this year, a website development company called Duda sought to assess the impact of the change on SMB websites. Looking at more than 4,700 small business websites, the company found, on aver-age, that mobile-friendly sites received a 11% bump in visibility and traffic.

Local directory publisher and media company, Hibu, reported in early 2014 that fewer than 10% of SMB websites

in the US and UK were mobile ready. As BuzzBoard’s data suggest, things have improved. In many cases adapting SMB sites for mobile is being done automatically by web hosting companies that use “responsive web design” to automatically configure websites for the device being used, whether a PC, tablet or smartphone.

SMB marketing surveys in 2015 convey the impression that large numbers of local businesses are investing in mobile. As one example, Endurance Interna-tional Group, which now owns Constant

Contact, found in March 2015 that 71% of SMBs were planning to invest in mobile within the next two years. This survey also reported that only 22% of SMB-respondents currently had a “mobile solution or app,” while 78% did not.

BuzzBoard examined millions of SMB websites in the US. The company seg-mented the data by city and found a wide range of mobile-preparedness, from a low of 29% to a high of nearly 60%.

BuzzBoard crowned Frisco, Texas as the most mobile ready city in the country.

Figure 7: Top five mobile-ready US cities

4. West Valley City, UT

1. Frisco, TX

2. St. Petersburg, FL

3. St. Louis, MO

5. Rochester, MN

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A Mobile Site Is Not Enough

SMBs do generally seem to understand that mobile is important, if not critical, for their future success. Numerous surveys show that a majority of business owners intend to invest in mobile (typi-cally in the future). Standing in their way are some perceived obstacles, which may be more imagined than real.

The issues identified in Figure 8 are less actual barriers than they are perception and education issues. Webhosting com-panies now build sites in “responsive design,” a technology that helps the site content and layout to adapt to the de-vice, regardless of screen size. Websites created with Wordpress software also automatically deliver a mobile version

but can also be further customized with some additional effort.

Beyond this many service providers and vendors can create dedicated or stand-alone mobile sites at relatively low cost – Duda, for example. But simply having a site that Google considers “mobile friendly” is ultimately not as important as serving the needs of real customers and prospects.

In other words, having a mobile site should not simply be about “checking off the mobile box.” Instead the focus should be on using mobile to advance the business goals of the company (i.e., leads, calls, visits, sales and loyalty).

Figure 8: SMBs’ perceived obstacles to creating a mobile site

Source: Endurance International Group 2015

Lack of skill and knowledge 50%

Lack of time to maintain 23%

Cost to develop 22%

Concerns about security risks 5%

Somewhat surprisingly, tech-savvy Santa Clara, California had the highest percentage of SMB websites that aren’t mobile ready (56.9%). In fact, a number of Silicon Valley and San Francisco Bay Area cities ranked near the bottom of the BuzzBoard mobile-readiness indicators.

Using its mobile site penetration data, BuzzBoard calculated the potential revenue opportunity tied to upgrading mobile-deficient SMB websites across the country. The company determined that opportunity could amount to $11.3 billion in the US. Acccordingly, there is considerable potential revenue associat-ed with helping SMBs get mobile-ready.

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There are many SMB mobile websites that look OK on a smartphone but do a terrible job of addressing actual customer needs. This brings up the question of mobile site design. Taking on this subject at any meaningful level of detail is beyond the scope of this report. However below are a few high-level concepts and considerations:

• Load time: Pages should load quickly. This makes for less user frustration and will be rewarded by Google.

• Touch-friendly: Pages should be uncluttered and be easily accessible to thumbs and figures of various sizes.

• Simple navigation: Menus and navigation should be limited, intuitive and touch-friendly. Links shouldn’t be too close together.

• Contact information: Many mobile users will want to call. Address and phone information should be immediately accessible or no more than “click down.” Phone numbers should generally be on the home screen.

• Forms: If there are forms (e.g., request for info, lead capture,

payments), require no more than the bare minimum to accomplish the intended outcome. Without an auto-complete capability, filling in mobile forms can be very frustrating (mobile Safari and Chrome both have this functionality).

• Images vs. text: While images generally are more compelling than descriptions of products and services, they should be used judiciously to prevent slow load times. Text shouldn’t be too small to reach on a smartphone screen.

There are nuances and variations that might change by industry or category. For example mobile site development might play out quite differently for an auto dealer vs. a restaurant or a hair salon or a lawyer. In many cases provid-ing basic information may be sufficient to generate a phone call (the often-de-sired objective). Conversely, advanced features such as online booking may be the desired objective.

Yet consumer expectations are evolving. Leading mobile apps, many of which of-fer transactions (e.g., restaurant reser-vations, hotel booking, ride-sharing) are shaping and fueling those expectations. As one example, a recent survey of 6,000

Figure 9: Transactional capabilities increasingly sought by mobile users

Source: Yodle, April 2015 (n=6,000 US adults)

29%28%

26%

Would you like to see this change at local businesses over the next year?

Electronic appointment scheduling

Electronic payments

Electronic billing

What about Mobile Apps?

Many of these advanced capabilities can only occur within mobile apps. Gener-ally speaking, by integrating with the phone’s core features, apps can deliver a better user experience than mobile websites.

User engagement is another argument in favor of apps. Digital media time has shifted to mobile and mobile media time is dominated by apps. According to Yahoo’s Flurry Analytics and comScore, nearly 90% of mobile media time is now spent in apps with only 10% going to

the browser. That doesn’t tell the whole story because the mobile browser has much greater audience reach than apps. And most smartphone users concen-trate their time on roughly 3 to 5 favorite apps.

Depending on its features, an app can cost a great deal to produce. It must then be marketed to generate down-loads. Even then there’s no guarantee smartphone owners will continue to use downloaded apps; there are high rates of abandonment. Recent research from

Figure 10: 90% of time spent with mobile apps

Source: Flurry Analytics, comScore (August 2015)

Source: Flurry Analytics, comScore (August 2015)19+12+3+17+15+8+4+2+10+6+4+IFacebook

19%

Messaging/Social12%

YouTube3%

Entertainment17%

Gaming15%

Utilities8%

Productivity4%

News2%

Others10%

Safari6%

Chrome4%

10%BROWSER

90%APPS

US consumers by local internet mar-keting firm Yodle found that there was a growing desire among consumers for certain advanced mobile-transactional capabilities from SMBs.

The survey discovered that “more than a quarter of consumers want more local businesses to provide the option of booking appointments and managing billing and payments online.”

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• If an SMB doesn’t have a website, the business owner can pursue both PC and mobile site development simultaneously. That argues for a responsive design approach. This is a relatively straightforward way to handle multi-platform consumer behavior.

• If there is an existing PC website, determine whether it’s mobile-friendly with the following Google tool: https://www.google.com/webmasters/tools/mobile-friendly/

• If the site is mobile friendly, move on to the more difficult question: does it “work” and deliver against whatever promises it makes to customers. Be highly critical of the user experience. Make changes accordingly.

• SMBs should also determine whether their listings data (name, address, phone) and any enhanced content (e.g., photos, videos, menus) are present and complete in the

major mobile sites and apps their referrals come from (e.g., Google, Facebook, Yelp, TripAdvisor, etc.). If correct on the desktop, they will also tend to be in the mobile version. The underlying databases are the same. Business data appearing on Yelp’s main site, for example, will equally appear in Yelp’s mobile app. The same is true for Google Maps, TripAdvisor, OpenTable and so on.

• Updating or correcting any listing should be pursued through existing PC-based channels that many business owners know well. Any changes will then equally disseminate in the mobile ecosystem.

• Finally, after a period of observing customer interactions with the mobile site, determine whether it makes sense to build a mobile app for advanced functionality or a loyal customer segment.

SMB Mobile Checklist

Localytics shows that users are willing to try apps an average of 4.5 times before uninstalling them.

On balance, these factors argue against most SMBs developing their own apps, except in selected circumstances.

In some cases SMBs may be justified in building an app if their interactions with customers are characterized by some of the following:

• Customer regularity/frequency (salons, coffee houses, dry cleaners)

• Intense research before buying (cars, real estate)

• Sustained interactions with customers around a life event or other high-consideration project (wedding planning, home renovation)

• Immersive leisure/vacation experiences (casino, resort or theme park)

• Ongoing communications between merchants and customers (or B2B supply chain communications)

Apps generally are downloaded and used by regular or loyal customers. In this sense they’re not a substitute for mobile sites but complement them. Indeed, mobile websites have great potential reach and no download re-quirements.

SMBs can also build mobile websites with a high degree of app-like function-ality, including scheduling and transac-tions (if appropriate). Over time SMBs can consider building an app for their most loyal customers.

In terms of sequencing, SMBs should build the best mobile site they can (or adapt an existing site). They should defer the app question until later, unless it’s clear that an app makes no sense for the business.

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SMBs with mobile-friendly websites are in a better position to compete and succeed than those without them. Those that aren’t mobile ready will ultimately suffer and potentially fail. Thus there are immediate economic consequences (or benefits) for business owners as well as local municipalities.

As indicated above, SMBs provide the bulk of local job creation. Communities that support them are going to be economically stronger than those that do not.

Local governments thus have an interest in enabling SMBs to make the transition to mobile. This can be done by hosting educational events and forums, providing online tools and learning materials and directing SMBs to recommended mobile develop-ers or providers.

By the same token, media companies and digital agencies have an opportunity to help strengthen local com-munities by boosting SMBs. They also can tap into meaningful new revenue streams associated with mobile site and app development, as well as mobile marketing and advertising thereafter.

We now live in a world where internet access and activity are much more smart-phone-centric than even a couple of years ago. It’s imperative that SMBs quickly (but thoughtfully) transition to mobile in order to keep pace with rising consumer expectations and changing behaviors—which are accelerating.

Taking a “wait and see” approach to mobile is no longer an option.

Conclusion: Not If but When

We now live in a world where internet access and activity are much more smartphone-centric than even a couple of years ago.

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