In the second of a two-part series on the online lending industry’s use of paid search advertising, AdGooroo has examined advertising for online small business loans, which have emerged as an alternative to traditional bank loans in the years since the Great Recession. (Last week we looked another major category of the online lending industry, personal loans.)
To conduct the study, AdGooroo examined U.S. Google desktop text ad activity on 116 business loan-related keywords such as ‘small business loans’, ‘business loans’ and ‘business line of credit’.
As we found with the personal loans industry, there was a substantial increase in paid search ad spending on online small business loans from 2014 to 2016. Paid search spend on the business loan keyword group increased 66% during the period, from $19.9 million in 2014 to $32.4 million in 2016, largely on the strength of a 30% increase in consumer clicks on the 116 business loan-related keywords as well as a 29% increase in the average cost per click on the keywords, which rose from $13.92 in 2014 to $17.89 in 2016.
As we also saw in the personal loan category, the number of advertisers sponsoring the online loan keyword group decreased during the period, although far less dramatically. While the total number of personal loan advertisers dropped 44% from 2014 to 2016, the number of advertisers sponsoring the 116 online small business loan keywords decreased by 11%, from 2,651 in 2014 to 2,349 in 2016.
Kabbage Leads in Share of Clicks
Focusing on a more recent time period, January 1 through March 5, 2017, we found online lender Kabbage leading the category with 7.4% of total clicks on the small business loan keyword group, followed by two sites that do not lend money but instead allow users to compare and apply for loans from various lenders: Biz2Credit.com (6.3% click share) and Lending Tree (6% click share).
In addition to Kabbage, there were eight other ‘FinTech’ online lenders who generated a click share greater than 1% on the 116 small business loan keywords: SnapCap (3.9% click share), United Capital Source (3.3% click share), OnDeck (3.2% click share), Fora Financial (3% click share), National Funding (2.3% click share), SkyCap Funding (1.9% click share), Funding Circle (1.9% click share) and Headway Capital (1.1%). The company BizFi (1.6% click share) appears to be a hybrid of sorts that combines “aggregation” and “funding”.
Additional apply-and-compare marketplace sites include Fundera.com (3.9% click share), Top10BestBusinessLoans.com (3.2% click share) and Lendio (3% click share).
Traditional Financial Service Players
There were two traditional financial services companies with a click share above 1% on the keyword group. American Express is truly competing in the category, gaining a 2.9% click share for paid search ads promoting its own small business loan offering. In contrast, Capital One gained a 1.4% click share promoting its business credit cards primarily via business credit keywords such as ‘business line of credit’ rather than business loan-specific keywords such as ‘business loans’.
Staples Offers Small Business Loans
We were surprised to find global office supply retailer Staples garnering a 1.7% click share on the 116 small business loan keywords. It turns out the retailer has been offering a variety of loan options to its core customers, small businesses, since 2015 via a partnership with the aforementioned Lendio. In recent months, Staples has continued to expand beyond office supply products by introducing a variety of record storage and cloud management services.
Note: The results of this study are limited to U.S. Google desktop text ad activity on the 116 small business loan-related keywords mentioned. Advertisers may be sponsoring additional keywords that, if measured, would alter the findings of this report.