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Popularity of Facebook With Local Businesses Drives Rapid Adoption of Facebook Ads, Positions Company to Gain Market Share in Local Deals

June 9, 2011 - Mountain View, CA

MerchantCircle, the largest online network of local business owners in the nation, today shared results of its quarterly Merchant Confidence Index survey of nearly 5,000 local business owners across the U.S. The data reveals that new local ad offerings from Facebook are making inroads with local merchants and may put increasing pressure on Google and pure-play deals companies such as Groupon for share of local marketing budgets.

"Facebook and other social networks have already established themselves as important marketing channels for local businesses, and the company is effectively parlaying this popularity into local ad sales," said Darren Waddell, vice president of marketing at MerchantCircle. "Most local merchants are working with very small budgets and tend to prefer marketing methods that are easy and familiar, so it stands to reason that many merchants will gravitate towards a well-known brand such as Facebook when it comes to trying locally targeted display ads and group buying."

Key conclusions from the survey include:

(1) Facebook Ads are gaining popularity among local businesses.

With its huge consumer adoption, ease-of-use and low barrier to entry, Facebook continues to be the most popular way for merchants to market their business, with 66 percent using the social network for marketing.

Facebook Ads, Facebook's targeted display ad offering, is benefitting from the social network's high level of adoption and boasts a remarkable 94 percent awareness rate among local merchants. While only 22 percent of merchants report having used Facebook Ads since its launch, nearly two-thirds (65 percent) of these merchants say that they would use the service again, citing ease of use (67 percent) and the ability to start and stop campaigns (65 percent) as the top reasons for continuing.

However, not everyone has seen success with Facebook Ads. Of the 35 percent of merchants who said they would not advertise with Facebook again, 69 percent said that the ads did not help them to acquire new customers, and 35 percent said the ads were too expensive.

(2) Familiarity may favor Facebook and Google in daily deals market.

When it comes to daily deals, data indicates that familiarity with Facebook and Google will make these well-known brands a strong alternative to Groupon and LivingSocial, with about 52 percent saying that familiarity with these brands would lead them to choose Facebook Deals or Google Offers over competitive offerings. Other reasons for choosing Facebook Deals include bigger audience size (26 percent) and better local targeting (21 percent), while those more likely to use Google Offers cited Google's bigger audience size (42 percent) and Google's brand reputation (34 percent) as top reasons for preferring Google.

(3) Merchants are warming up to group buying, but adoption is slow.

While three months ago, only 50 percent of merchants who had tried offering a group deal said they would do so again, 77 percent now say they would be willing to offer another daily deal, citing effectiveness in customer acquisition (58 percent), favorable deal structure (30 percent) and profitability of the deal (24 percent) as their top three reasons.

Among those who wouldn't offer another daily deal, 42 percent said that it was not effective in customer acquisition, 25 percent said it was too costly and 24 percent said they lost money.

Mixed opinions about the medium's effectiveness for customer acquisition may be contributing to its slow growth among local merchants, with just nine percent of local merchants having offered a daily deal using a service like Groupon or LivingSocial. This is not for lack of aggressive sales and marketing efforts; more than a third of respondents who offered a daily deal did so after being contacted by a sales rep (34 percent) or seeing an ad for the service (31 percent).

(4) Use of traditional offline marketing methods continues to decline, location-based marketing also slows while mobile marketing is still barely on the radar.

Investment in traditional offline marketing methods continues to decline among local merchants. Over the past three months, use of print advertising dropped from 27 percent to 24 percent; use of print Yellow Pages declined from 37 percent to 29 percent; and use of direct mail decreased from 28 percent to 26 percent.

The popularity of location-based marketing services has also dropped over the past quarter. Data shows that 22 percent of businesses are using Facebook Places to market their business, while just seven percent are using Foursquare. This is trending downward from the last survey in January 2011, when 32 percent said they were using Facebook Places and nine percent said they were using Foursquare.

In spite of the hype around mobile marketing, just 18 percent of merchants report doing any sort of mobile marketing or advertising. Lack of understanding continues to be a major barrier to adoption: 71 percent of merchants state that they don't have a good idea of how to reach consumers via mobile marketing. Additionally, only nine percent said they own a tablet, with nine percent said they planned to buy one in the next six months.

(5) Local merchants continue to have little time or money for marketing.

MerchantCircle's data shows that local marketing budgets continue to be very small: 61 percent of local merchants are spending less than $2,500 a year on marketing, and 73 percent have no plans to raise their budgets this year. Time is also a critical issue for merchants, with 37 percent citing lack of time and resources as their top marketing challenge.

About the Merchant Confidence Index

The Merchant Confidence Index is a quarterly survey conducted by MerchantCircle, the largest social network of local business owners in the U.S. with over 1.6 million members. The Index is designed to track trends in small business sentiment over time and is derived from four key questions designed to synopsize the prevailing trends among local business owners. The overall index score is based upon a standardized five-level Likert scale.

This sixth Merchant Confidence Index survey was fielded online, between April 30 and June 6, 2011, and sent to a random sample of MerchantCircle's member base of over 1.6 million local business owners. There were 4,942 total responses from local business owners across the United States. Responding businesses classified themselves as legal and financial services, automotive, health and beauty, entertainment, travel and more, with 78 percent of respondents employing fewer than five people. The survey data can be broken out by state, business type or business size (by headcount) upon request. No incentive was offered to complete the survey.

About MerchantCircle

Founded in 2005, MerchantCircle is the largest online network of local business owners in the nation, combining social networking features with a variety of free marketing tools that enable merchants to maximize their online visibility. Over 1.6 million merchants use the tools offered on MerchantCircle to create conversations with customers and connect with fellow local merchants. Local consumers can find more than 20 million business listings through or major search engines in the U.S., Canada, United Kingdom and Australia. In addition to its free services, MerchantCircle offers a portfolio of premium online advertising solutions including search engine marketing and instant website development.

In May 2011, MerchantCircle entered into a definitive agreement to be acquired by Reply! Inc., the leading marketplace for the acquisition of locally-targeted and consumer traffic. In 2010, MerchantCircle acquired TimeBridge and the popular Bloglines service to further extend its network offerings. MerchantCircle is based in Mountain View, Calif., and funded by Rustic Canyon Partners, Scale Venture Partners, Steamboat Ventures and IAC. Learn more at

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Media Contacts:

Kevin Cheng

Robyn Hannah


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