Survey Shows Local Business Owners Lack Confidence in Government Boosting Economy

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Mountain View, California (PRESS RELEASE – October 21, 2010) – MerchantCircle, the largest online network of local business owners in the nation, announced the results of its quarterly “Merchant Confidence Index,” a survey of nearly 10,000 local business owners that gauges their confidence levels in the current economy and future marketing plans. Despite a recent report that the recession ended in June 2009, and the signing of President Obama’s small business stimulus bill, the Q3 2010 survey results reveal that economic sentiment among merchants has declined slightly to 60.35, the first decline since Q4 2009.

The majority of merchants rated today’s economy as weaker than it has been over the past 12 months, and 50% say they would not start their business again in today’s economic climate, an 18% increase year-over-year. On a positive note, merchants did report optimism about holiday sales and credit availability.

“Although the recession technically ended in June 2009, merchants tell us that they are yet to feel the recovery kicking in,” said Darren Waddell, VP of Marketing and Product for MerchantCircle. “The good news is that the spirit of American small business is alive, they are hopeful about the future and looking to new places for solutions. The Tea Party’s soaring popularity surprised us this quarter, and merchants are continually looking for fresh ways to invigorate their business through free marketing channels. We are hopeful that the 2010 Holiday season is fruitful for our members.”

16% Think Tea Party is Most Supportive of Small-Business; 93% of Merchants Are Unaware Or Do Not Expect to Benefit from Obama’s Small Business Act

Leading up to critical November elections, 16% of merchants believe that the Tea Party is the most supportive political party of small business interests, while confidence in Democrats and Republicans is now virtually deadlocked at 23%. Currently, 37% of merchants are unsure which party is most supportive.

“From these numbers we conclude that many businesses are tired of the current political climate in Washington, and are open to new political parties and new ways of doing things,” continued Waddell.

Merchants have little confidence in President Obama’s recent passing of the Small Business Lending Act, aimed to assist small businesses by cutting taxes and creating a $30 billion loan fund. While 65% of merchants are aware of the Act, a paltry 7% of merchants actually expect to benefit from it. 28% were not even aware of the Act’s existence.

Merchants Say that for Them, The Recession Is Still Not Over

More than one year after the official end of the recession in June 2009, 46% of merchants report that their business has decreased since then, and an additional 30% said it has remained flat.

When asked if they would start their business again in today’s economic climate, 50% of merchants said they would not — a number that has grown 18% year-on-year.

Most merchants still do not think “the worst effects of the recession are behind us.” In fact, confidence in this area has steadily fallen over the last year. Today, 56% of merchants believe the worst is yet to come (versus 49% in Q2 2010, 45% in Q1 2010, and 41% in Q4 2009).

Half of Small Business Owners Use Smartphones; 40% Plan to Reach Consumers Through Mobile Marketing; BlackBerry edges iPhone as most popular device

49% of merchants own a mobile smartphone, which they use for email, phone, and scheduling. Of those smartphone owners, 35% own BlackBerrys, 33% own iPhones, and 25% own Androids. Forrester Research recently reported that less than 20% of mobile users nationally owned smartphones.

Currently, 40% of merchants are marketing their businesses via mobile device or plan to in the next 12 months.

Adoption of LinkedIn, Yelp and Bing Outpaced Facebook in Q3; Social Media Marketing Continues to Soar Among SMBs

Online marketing methods have continued to see quarterly growth. 56% of merchants have now created a social networking profile (other than MerchantCircle) versus 48% in Q2 and Q1 of 2010.

When asked about the services they use to promote their businesses in Q3, 33% of merchants used Bing (versus 23% in Q2 2010), 55% used LinkedIn (versus 43% in Q2) and 32% used Yelp (versus 22% in Q2). Facebook usage among small businesses jumped from 60% to 69% over the last quarter.

44% have undertaken email marketing campaigns versus 38% in July 2010. 13% have used online video versus 11% last quarter, and 19% plan to use online video in the next quarter.

Holiday Optimism Increases 7% Year-on-Year, 28% Jump in Credit Expectations Quarter-on-Quarter

Regarding upcoming holiday sales, merchant sentiment has improved year-on-year. 34% of merchants expect holiday revenue to “improve” or “improve significantly” in 2010. This compares to 27% who expected an improvement in 2009.

Merchants are also expecting to increase their marketing and advertising spend. Over the next three months, 27% of merchants expect to somewhat or significantly increase their marketing and advertising expenditure.

Merchants showed a large jump in credit confidence in Q3 2010: 72% of respondents expect credit availability to improve or stay the same over the next three months, a 28% jump quarter-on-quarter (44% July 2010).

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 1.3 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 fourth Merchant Confidence Index survey was fielded online, between October 4th and 8th, 2010, and sent to a random sample of MerchantCircle’s member base of over one million local business owners. There were 9,635 total responses from local business owners across the United States. 13% of responding businesses classified themselves as professional services fell into other categories, such as legal and financial services, automotive, health and beauty, entertainment, travel and more. 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, combining social networking features with a variety of free marketing tools that enable merchants to maximize their online visibility. Currently, over 1.3 million merchants use the MerchantCircle network to upload pictures, blog, create coupons and newsletters and connect with customers and other 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.

Ranked as one the Top 100 web sites in the U.S. by Quantcast, MerchantCircle is based in Mountain View, Calif., and funded by Rustic Canyon Partners, Scale Venture Partners, Steamboat Ventures and IAC.

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