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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.

KERRIGAN: ESG Mandates Mean Fewer Choices, More Uncertainty

For many people, especially small-business owners and entrepreneurs, uncertainty is the only certainty about the economy. Unfortunately, policy ideas that aren’t well thought out only intensify the uncertainty and make it harder to plan.

Lawmakers and regulators should be striving to do the opposite. In the last few years, Americans have endured inflation, supply chain disruptions, a possible recession and more layoffs. Again, small-business owners have been on the front line of it all. They, like most Americans, are still planning for their futures and need as many options as possible.

Several major investment managers have leaned into Environmental, Social and Governance (ESG) goals to determine how they invest funds on behalf of their stakeholders, which include pension funds and individuals (such as small-business owners) planning for retirement. According to their ESG goals, investment managers have declined to invest in certain companies and industries, including fossil fuels.

These tactics have received understandable scrutiny from lawmakers who question whether these investments are designed to maximize returns.

The problem with ESG investing isn’t that it exists. The problem is that some asset managers make it the only option. Americans should have as many tools as possible to plan for their futures, whether saving for retirement or getting ready to take on a new entrepreneurial challenge. If investors don’t like the options presented to them, they should be able to take their business elsewhere.

Gallup survey in 2022 found that 78 percent of investors consider expected returns when deciding where to place their money, while 41 percent consider corporate governance, 38 percent consider social values and 35 percent consider environmental impact. ESG investing isn’t for everyone — and that’s a decision that every individual should be able to make themself.

There are valid questions about the wisdom of investment managers categorically refusing to invest in specific sectors. The answer to these questions shouldn’t be another mandate that could hurt individual investors, who are smart enough to make these decisions as long as they have every available option.

 The investment field should be as wide open as possible, ensuring low-cost products that provide freedom of choice to select the most effective investments from a broad range of options. Mandates — whether from ESG-fueled asset managers or lawmakers who question those strategies — only force investors into one position or another and rob them of their choices.

One asset manager understands this balance. Vanguard, one of the largest investment managers worldwide, gives its customers every option. Importantly, it is not incentivized into one position or another on issues like ESG. The company is uniquely structured by being client-owned and operated at cost. So as an investor in Vanguard funds, the customer’s interest and Vanguard’s are one and the same.

In December, Vanguard withdrew from the Net Zero Asset Managers initiative, an alliance that uses its investment portfolios to contend with climate change. In withdrawing, Vanguard cited a commitment to its “singular goal” of maximizing long-term returns. Climate-focused funds remain available to those who want them, and other funds are available to investors with different priorities. That’s the way it should be.

The only sensible ESG policy solution for lawmakers and regulators is to step out of the way and let firms do what they do best — help consumers, entrepreneurs and small-business owners invest in themselves, their employees and build sound financial futures. 

In times of uncertainty and an unpredictable economic climate, this is one of the most effective and empowering tools we have left. Mandates, bans and other heavy-handed regulations make it more difficult for investors to plan. These proposals should be roundly rejected in favor of a wide-open investment landscape allowing everyone to make the best decision.

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