The Value of Digital Advertising for SMBs

Firms spent over $285 billion on advertising in the United States in 2021, of which about $160 billion was on digital ads. Advertising is believed to be instrumental in the growth and success of businesses by allowing firms to reach new markets as well as lowering search costs and frictions for consumers. The advent of digital advertising, a burgeoning recent phenomenon, has the potential to be even more valuable to firms and consumers alike. Digital ads can be highly targeted towards relevant consumers and reach difficult or niche markets at relatively low costs. In spite of the rapidly growing nature of digital ads as the predominant means of advertising, and widespread interest from both academia and industry, there is still relatively little evidence on the effectiveness of digital advertising on firm performance. Our RCT aims to provide empirical evidence on the value of digital advertising to firms, in particular SMBs, in terms of firm revenue and growth. Our experiment will allow us to study a large number of businesses and answer questions such as what are incremental impacts of digital advertising on firm success, and how these results vary across different firm characteristics.