"I think they're slowly shifting more from traditional media to online," said Sanjeev Aggarwal, senior analyst at Boston-based The Yankee Group. "Their total spend is the same, but the mix of media is shifting."
According to research by The Yankee Group, online marketing and advertising spending by small and medium-sized businesses (SMBs) in the U.S. will increase from $1.3 billion in 2005 to $9.3 billion in 2010.
"The reason most often given for going online is the ability to geotarget advertising, to only show their advertising within a designated region," Riley said.
Riley said she expects to see an increase in online advertising across all sizes of businesses, but she added small businesses specifically understand the value of local sponsored searches and classified advertising online.
Chris Hill, senior vice president of marketing at DirectoryM, a company that specialises in local online advertising services, said his firm recently polled 128 of its customers about their online advertising.
Hill said his customers are now spending 52% of their total advertising budgets online, and 37% of them plan to increase their online spending this year.
Hill said SMBs are looking for targeted, economical online advertising, such as directories in business publications. "If I'm a small or medium business owner, I can't afford to have a banner ad on The Wall Street Journal."
Dave McKeon, managing partner of Game On, a US leadership consulting and coaching firm, said he has rarely bought advertising in print publications in the past. Instead, he has relied on referral-based marketing.
But as his client base expanded into countries as far away as Poland and India, he knew he had to take a different approach.
"How do I reach these folks?" McKeon said. "I hadn't been impressed with trying to play the search engine game."
McKeon began working with DirectoryM, which specialises in running business directories for online publications, including The Wall Street Journal, the Financial Times and 42 regional business journals.
Now McKeon said he spends half his advertising budget online.
Stephan Hovnanian, CEO of Shovi Web Design, said he prefers to use online advertising because "it's more targeted and I have limited resources."
Hovnanian said he has had success advertising with Google Adwords and DirectoryM.
"With the types of responses I've had with those services, there are no reasons to look into other channels of advertising because it's working for me."