Small-and medium-sized businesses are now spending 11 percent of their advertising budgets on online marketing campaigns, up from less than 4 percent three years ago, according to a new report from Borrell Associates.

These SMBs are blurring the lines between what’s advertising and what’s not. They consider whatever they spend on their own Web sites to be advertising, but that is a technology, design and telecommunication expense.

SMBs are less receptive to buying banner ads but are in favor of search engine advertising, online directory listings and streaming video.

The nation’s 14.6 million SMBs were responsible for more than $6.9 billion in locally generated, locally targeted interactive advertising in 2008- more than half of the U.S. total.

“The owners of small businesses would be well advised to understand these trends as they look to the Internet to help stimulate sales from both inside and outside their market,” the report states. “Many Internet marketing products are oversold and under perform.”