Online advertising has been getting more expensive. That’s pinching small businesses.
Online advertising has been getting more expensive. That’s pinching small businesses.
This month, two online giants — Facebook’s parent company, Meta, and Google’s parent, Alphabet — reported that their ad revenue was down last quarter compared to the same time a year ago.
That slowdown in ad spending means businesses are concerned about an economic slowdown. But a lot of smaller businesses say they’re going ahead and advertising anyway.
Throughout the pandemic, a bunch of beauty supply stores popped up in the Dallas area. Frankesha Watkins owns one herself, and she watched as new competitors opened.
“For Black businesses — Black beauty supply stores specifically — I saw it go from three or four to 30 in Dallas in the last three or four years. That’s a lot,” she said.
The additional competition prompted Watkins to spend more on ads for her store, BPolished Beauty Supply, on social media, search engines and local billboards.
“My monthly ad budget might have been $1,000 a couple of years ago, where I didn’t have to get in front of all these stores,” she said. “Now, I have increased that by 50% or even 100%.”
Sales this year haven’t been as good as last year or the year before, Watkins added. But she’s still planning to keep spending on ads.
“So my overall goal for advertising is brand awareness, not necessarily, you know, making all the sales, which would be nice,” she said. “But it is important for me for people to know who we are, where we’re located, what we offer and those types of things.”
Another reason some small businesses are spending more on ads is that advertising online has become more complicated. A couple of years ago, Apple announced a new feature of its mobile operating system that allowed users to opt out of being tracked.
“And so it’s very difficult to say, ‘Oh, this is the type of person that buys our product’ and actually be able to reach them,” said Kate Matsudaira, who owns Ink+Volt, a company that sells journals, planners and other personal productivity tools.
Since she can’t target customers as precisely anymore, Matsudaira has been spending more on marketing in more places, like TikTok and search engines, and in more formats.
“We have to invest more in photography, we’re investing more in video, which is more expensive to create than photos,” Matsudaira said.
And all of that requires more expertise. “We now pay an agency to do our Facebook campaigns,” she said. “We hired a full-time social media person to focus on organic reach and building out our social media channels.”
All this has increased Matsudaira’s overall costs by about 10% to 15%, she estimates. That’s significant, considering that her notebooks and planners are low-margin items.
But Matsudaira said she doesn’t really have a choice but to advertise more, since that’s how she finds most of her customers.
“I mean, we’re all e-commerce and all online, and so it will continue to be a big investment area for us,” she said.
Matsudaira added that she’s paying her ad agency a flat monthly fee — so the more advertising she does, the better.
Stories You Might Like
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
