Digital advertising is big business for small businesses
Thirty years ago, the barriers facing a small business wanting to expand its customer base were far greater than they are today. Their advertising options were likely to be restricted to word of mouth, local media, or flyers, which all have limited reach and scale. Other media used by larger businesses, such as national TV or radio, or billboards, were either inaccessible, prohibitively expensive, or poorly targeted.
Thirty years ago, the barriers facing a small business wanting to expand its customer base were far greater than they are today. Their advertising options were likely to be restricted to word of mouth, local media, or flyers, which all have limited reach and scale. Other media used by larger businesses, such as national TV or radio, or billboards, were either inaccessible, prohibitively expensive, or poorly targeted.
This is why digital advertising, which is cost-effective and targeted, has been so transformative for small businesses. The Advertising Association’s Ad Pays 2 report states that every £1 that SMEs spend on advertising has 8 times the relative sales impact as it would for larger firms, so advertising is clearly crucial to SMEs’ success. This helps to explain why the majority now use digital advertising and why, according to IAB UK research, 4 in 5 cite reaching new customers as their most important reason for doing so.
With SMEs making up 99% of all private sector business in the UK and every constituency in the country home to dozens of them, Members of Parliament know how vital digital channels are for small businesses to get established and grow. Polling commissioned by IAB UK last month shows that three-quarters of MPs agree that online advertising helps businesses reach new customers.
This matters because next year will be important for the online advertising sector and the countless small businesses that it supports – and not just because of the challenging economic outlook. Following the Online Advertising Programme (OAP) consultation earlier this year, the Government will announce its proposed approach to further developing the regulatory framework for online advertising.
The decisions it makes will influence whether the digital ad industry – now worth £23.5bn to the UK economy – continues to thrive and offer cost-effective routes for smaller businesses to reach new and existing customers. The robust scrutiny of MPs could be vital to ensuring it does.
The OAP will be a success if policymakers recognise what is working, as well as what isn’t. It needs to take a tailored, evidence-led approach and not apply blunt, ‘one size fits all’ solutions. The sweeping statutory intervention that was mooted in the initial consultation, for example, would be disproportionate and unnecessarily limit the industry in areas where the low risk of consumer harm is already well-managed by existing initiatives and standards.
Any evolution of the regulatory framework should focus on targeting issues that can’t be solved by self-regulation, as well as bolstering the existing self-regulatory mechanisms that enable industry to identify and disrupt harms where they occur. Getting this balance right matters, because the impact that the OAP stands to have goes far beyond digital advertising.
A thriving, diverse and accessible digital ad industry is essential to keeping SMEs open for business. This should focus minds as policymakers decide what direction the OAP should take.
IAB UK hosted a reception in Parliament earlier this month to showcase how SMEs are benefiting from digital advertising.
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