For the first time, more small businesses are now advertising online than are advertising through traditional media such as newspapers, magazines, radio and cable TV, according to The Kelsey Group, a media research and consulting firm.

Results of Kelsey Group’s latest Local Commerce Monitor study, conducted with research partner ConStat Inc., are stunning. Of the small and medium size businesses surveyed, 77 percent now say they are using digital or online outlets to market their businesses while 69 percent are using traditional media.

This measure of media “penetration” doesn’t count spending, only the number of small businesses that are using or experimenting with online media. Small business still spends more money on traditional media, but that balance is changing even more rapidly.

Overall, the average small business slashed its total spending on advertising and promotion this past year by 24 percent. That’s partly due to the bad economy. But it’s also one byproduct of a steady shift to lower-cost digital and online media and away from traditional media.

The stunning part is this: Despite a precipitous drop in overall ad spending, small business owners actually increased their online spending by 27 percent over the past year. At the same time, the portion of advertising budgets that small business owners spend online has skyrocketed from 22 percent to nearly 37 percent.  “The milestone of digital and online media surpassing traditional media among small businesses is an indicator of the broad shift to online platforms,” says Steve Marshall, director of research for The Kelsey Group.

Small and medium business owners are also getting more sophisticated about advertising online. The study shows an increase in the number of small firms using the Internet to track or measure their sources of new business leads. Of businesses that track lead sources, the percentage doing so online jumped from 22 percent to 30 percent over the past year.

How to Improve PPC Results: If you’ve joined the online avalanche and are using, expanding or testing pay-per-click (PPC) search advertising, here are some great ways to improve your results. They come from Kevin Lee, founder and CEO of Didit.com and author of “The Truth About Pay-Per-Click Search Advertising” (FT Press, 2009).

Top-Load Your Ad Message:  When you write your ad copy, start with your conclusion to achieve immediate impact. Follow with strong statements that support it.

Use Google’s Dynamic Keyword Insertion (DKI) Tool:  Many small business owners are not aware of this powerful way to boost PPC results. Basically, it’s a way to guarantee that the keywords a customer uses to search for your product or service automatically appear in your ad message – even if they are different than those you’ve selected.

Google’s automated method uses a template with a special place for a “default” keyword or phrase that will automatically be replaced by the one used by the person searching. That gives you a better position in the results and ensures that the precise term the customer searched for appears in boldface in your listing.

Make a Compelling Offer: Emphasize what you have that the competition doesn’t and condense that unique benefit into 70 to 190 characters of type. “Some of my clients have had dramatic success changing their copy to be more enticing,” says Lee. But tactics will vary by business, so try a few different things to see what works. Lee makes these suggestions:

1. If you sell on price, include a price in your title and use a percentage discount offer in your message.
2. Offer free shipping (with no strings).
3. Use power words (but not superlatives) such as: great, save, latest, excellent, discount, special, experienced, rebate, coupon, detailed, easy, quality and guaranteed, among others.
4. Use brands in the copy if you carry them.

Use Catchy Domain URLs: Many customers look at the URL that appears with a search ad when deciding whether to click or not. “Searchers click on names they know and trust,” says Lee. If your name and URL aren’t a known brand or could cause confusion, consider creating a micro-site using a more descriptive or catchy domain URL that you can own for as little as $10.