DRAPEAU: Why Are Lawmakers Attacking Digital Ads?
t’s a no-brainer: any small business that wants to succeed in today’s hyper-connected world must have an online presence. I’ve researched small businesses for years. The data repeatedly confirm that e-commerce and digital advertising are incredibly effective ways for America’s small businesses to reach customers and increase their revenue. So, I don’t understand why so many state and federal policymakers don’t understand this and seem hellbent on breaking the digital advertising ecosystem that works so well for so many people.
Let’s start with the facts. New research recently published by the Data Catalyst Institute finds that small businesses’ digital ads reach more potential customers and drive more revenue than traditional advertising on TV, radio and billboards. Nearly 80 percent of small businesses attribute digital ads to helping them compete against larger companies. It’s completely understandable why more than two-thirds of small businesses’ advertising budgets are spent on digital formats such as social media, search, display and mobile-only ads.
Selling digital ads is also a crucial revenue driver for small publishers — websites, blogs, email newsletters, podcasters and video channels. Free content publishers — the overwhelming majority of online publications — survive and thrive because advertising sustains them. By targeting niche, hard-to-reach audiences, small publishers can charge premium advertising prices to other businesses that need to reach those same audiences. Data-driven, relevant advertising works so well that a small publisher can generate revenue on the first day of publication with some planning.
A remarkable 71 percent of small publishers surveyed said they would not have been able to start their business without advertising revenue.
Many legislators and regulators think that Google and Meta are the only digital advertising options and that their size justifies more regulation. But our research shows that most small-business advertisers disagree. They reported using 11 digital advertising platforms, and most respondents bought ads simultaneously through several platforms. Google and Meta are the most prominent advertising platforms, but Amazon, Microsoft and Twitter are strong competitors for reaching different audiences. Less known is that Walmart, Target and other “traditional” retailers have followed Amazon into advertising, transforming their huge online stores and marketplaces into platforms to host digital ads from small business retailers.
Simply put, digital ads work because they are inexpensive, easy to buy, and reach relevant audiences. This is particularly helpful for typical small-business owners who need to be smart about spending their time and working capital.
Anonymous consumer data collected by advertising platforms enable small businesses to place relevant ads on websites, blogs and other publications popular with the advertiser’s customers and potential customers. But right now, the Federal Trade Commission is exploring new rules that would make it harder for platforms to collect and analyze consumer data, while a proposed Florida bill would do something similar. If these regulatory efforts succeed, small-business advertisements could revert to the days of Yellow Pages and coupon mailers when there was no assurance that people who saw the ads would be interested in the product or service being promoted.
After experiencing digital advertising success, small businesses don’t want to return to the Advertising Stone Age, and for a good reason. Since they don’t have the sizable marketing budgets to advertise on mass media like their larger competitors, overregulation of digital advertising could devastate the small business economy. In fact, in research that the Data Catalyst Institute published in 2022, Dartmouth College professor John T. Scott estimated that legislation targeting “Big Tech” digital platforms could cost small businesses $500 billion in sales over five years.
Lawmakers love to talk about their support for small businesses. If they’re serious, they’ll abandon misguided efforts to tear down the digital advertising system crucial to small businesses’ success. Small businesses need affordable, easy-to-use, and effective digital tools to grow and thrive, and that’s precisely what today’s digital advertising platforms provide.
