SMBs Slow to Embrace Web 2.0 Technology

When the information superhighway that we now know as the Internet exploded in earnest in the early 1990s, most owners of traditional brick-and-mortar small businesses were caught in the slow lane. In the years since then, they have moved up the learning curve significantly. Today there's only one problem — the learning curve is rapidly shifting away from them.

While a large number of small businesses have established a Web presence — to market and sell products or use Web-based software — an overwhelming number have fallen behind the curve when it comes to the latest Web innovations. Known collectively as Web 2.0, the term represents many new Internet tools and interactive social-networking applications. They greatly enhance user experience and allow for real-time interaction with customers.

Early on, of course, most business-related Web sites were little more than advertisements for company products and services. But as Web technology matured, businesses quickly realized the value of e-commerce. Today, the ability to reach a vastly wider market through interactive sales is fueling an even wider online boom.

Like many consumers, I am part of that boom. I typically turn to the Internet first to do research when I'm in the market for a big-ticket item like a new car. Recently, I went to one dealer's Web site to look at their inventory. Nothing too special about that; most dealers list their inventory online nowadays. But then I noticed a box that read "Click here to speak to a sales rep."

I expected to pull up contact information, so you can imagine my surprise when an instant-messaging window popped up. Even then, I thought I was about to get a canned advertisement. But, unbelievably (to me, anyway) a real salesperson was online. It was a great way to get questions answered without the pressure of being on the sales floor. It was also a great icebreaker for the sales rep and a cool overall experience for me. That's Web 2.0 innovation at work. (And, yes, I eventually bought a car there.)

These days, no one doubts that e-commerce is here to stay, and many businesses are spending huge sums to make their sites interactive. Yet a recent eye-opening survey by Capital Access Network in Scarsdale, NY, found that only 11 percent of small business owners are using Web 2.0 innovations (such as blogs) to connect with potential customers.

According to a separate study, more than 70 million blogs now inhabit cyberspace and at least 120,000 new ones are created daily. "Considering that the third most popular reason to go online for [survey] respondents is to generate new business leads and customers, to ignore the current state of the blogosphere may be detrimental to the future of these firms," the survey noted.

A few years ago, another far-reaching study by the federal government proclaimed that the Internet promised to "become the economic underpinning for all successful countries in the new global economy." As online sales grow, that prediction is quickly coming to fruition. Here are some of the key findings for small business owners to keep in mind:

• Income: Internet use is directly related to income. Nearly 60 percent of those who have incomes of $75,000 a year or more have Internet access, compared to only 12.1 percent at the lower end of the scale.
• Ethnic Origin: Whites (37.7 percent) and Asian/Pacific Islanders (35.9 percent) use the Internet far more than African Americans (19 percent) and Hispanics (16.6 percent). Urban whites are the most likely to be connected to the Internet at home. Rural blacks are the least likely.
• Education: Not surprisingly, education levels and Internet usage are closely related. Those with a college education have a usage rate (61.1 percent) that is nine times higher than the least educated Americans.
• Households/Age: Urban married couples with children under age 18 are most likely to be online while urban households headed by single females with children are least likely. The 35-to-44 age group is most likely to be online, and people 55 and over are least likely.

It's clear from the findings that Internet users are an affluent and growing market. On the plus side, the Capital Access survey confirmed that small businesses understand what the Internet means to their bottom line. Almost half (46 percent) make some money from the Web, and a majority (60 percent) uses the Internet for some business and personal needs. But most small business owners are still riding with training wheels. Almost seven in ten (68 percent) only use first-generation search engine optimization tools to help drive traffic and another 58 percent use the Web mainly for advertising, the survey found.

For many small businesses the cost of investing in online technology can be steep, but the price for falling too far behind the curve could be fatal.