Digital advertising crucial to SMEs’ recovery

• 60% of SMEs are currently using paid digital advertising

• Half say that digital advertising is more important to their business now in time of crisis 

• More industry support needed to maximise the impact and value of digital advertising

With the UK’s SME economy currently navigating the fallout of the COVID-19 pandemic, new research shows that 64% are concerned about the future of their business and half of all SME advertisers¹ consider digital advertising to be more important than ever to support their business during this time of crisis. 

The findings come from IAB UK’s study, ’Powering Up’, released today. Conducted with MTM, the research draws on evidence from nearly 1,200 UK SMEs to understand how they’re using digital advertising, where they feel it excels and where more support is needed to help them get greater value from digital advertising during this period. 

Results show that 60% of SMEs across the UK are currently using paid digital advertising and 67% use free digital tools. Of those that use it, 63% say that digital activity provides a good return on investment, with reaching new customers, generating sales and its speed and flexibility cited as digital’s main strengths. Overall, the study estimates that up to 45% of all digital ad spend comes from SMEs². 

However, while SMEs’ uptake of digital is high and perceptions generally positive, the findings also point to opportunities for SMEs to diversify their strategies and get more value from digital channels. 70% of SMEs believe that communicating with customers is more important than ever at the moment and 58% are keen to diversify their communication strategy during the pandemic. Yet, 40% are currently not using paid digital advertising at all and, among those that do, the average number of digital channels used is just 1.3. 

Among companies that aren’t investing in digital advertising, the majority point to cost, relevance or lack of knowledge and understanding as the main barriers. One in seven SMEs describe their knowledge and ability to use digital as “not good”. While social media is the most used paid-for digital channel, it also has the highest demand for more support on how to run a campaign effectively. 

The report also identifies a big opportunity to provide SMEs with more guidance on how to best use search and online display - fewer than one in five SMEs have used online display advertising in the past 12 months, despite it making up a large proportion of total digital ad spend.

Based on the findings from the study, IAB UK will be working with its members to develop tools and resources that provide digestible, interactive support to best help SMEs get the most out of digital advertising. 

Commenting on the study’s findings, Elizabeth Lane, IAB UK’s Head of Research and Measurement, said: “Over the past two decades, the UK’s SME market and digital advertising industry have both witnessed exponential growth, in part fuelled by one another. 

As we all now deal with the economic effects of COVID-19, digital advertising is continuing to play a crucial role for many SMEs, but the report also highlights clear opportunities to maximise the role that digital advertising can play to boost recovery. For us and our members, the next phase of this work will be acting on this insight to ensure that we are effectively supporting SMEs throughout this period and beyond.”

Nick Seeley, Associate Director of MTM, added: “It is clear from the study that the majority of SMEs are already tapping into digital advertising with many seeing it as critical to their business and even more so during the recent COVID-19 lockdown. However, there is still a significant proportion of SMEs who are unsure about digital advertising and how to make it work for them, along with many others who believe they could be using digital more effectively. This presents a great opportunity for the industry to help SMEs make the most of digital, supporting them both in the short-term as the economy recovers and in the longer-term.”

¹ This refers to the 73% of the UK’s SME market that use paid advertising across any media 

² See methodology for more detail

Methodology 

Part 1: Quantitative survey of SME decision makers

• 1,199 respondents of which all were the main or joint decision maker in marketing decisions and work at an SME (<250 employees) answered the survey, of which:

• 800 respondents who have used paid advertising in the past 12 months, either digitally or non-digitally answered the full 8-minute survey
• 399 respondents who didn’t use paid advertising only answered the screening questions around company profile, marketing methods used and barriers to advertising

The results are representative of UK online SMEs and were weighted towards ONS data in terms of company size and region

Part 2: Qualitative interviews with small businesses

• Range of sectors
• Spread of regions, with a particular focus outside of London

A note on the ad spend estimate

MTM’s estimate suggests a range of 34-45% of digital ad spend is accounted for by UK SME spend. This takes into consideration the number of UK registered SMEs in the UK, the proportion who use paid digital advertising by SME size band, average digital ad spend by SME size band, and an upper and lower limit of total spend by SME size band. Please note this estimate is based on 2.6 million registered SMEs, and does not represent the full 5.9 million SME businesses as reported by BEIS Business population estimates for the UK and regions: 2019 (which also includes unregistered SMEs with no employees).