Government’s Big Tech Pile-On: Will Small Businesses Get Squeezed?

By at 12 November, 2019, 7:19 am

Small Business Insider

By Karen Kerrigan-

There was a time when politicians on both sides of the aisle at all levels of government were highly supportive of policies that encouraged technological innovation and the internet ecosystem that eventually brought the U.S. to dominance in this space.

U.S. entrepreneurship and small business growth have benefitted tremendously from these innovations, along with the digital platforms that make it easier for entrepreneurs to start and scale their businesses.

Now, with government at all levels going after “big tech,” entrepreneurs and small businesses need to be watching their backs as well. “Solutions” such as breaking up tech companies, draconian regulatory proposals, or permission-based frameworks where government “OKs” innovate services and tools, would undermine the many gains the digital economy have brought to small businesses and their consumers.

For example, the tech platforms that offer digital advertising provide significant support to startups and small businesses. Small businesses need to continually identify and acquire new customers to grow and stay competitive. In a recent survey and report published by my organization (SBE Council) we found that the availability of online advertising is a key factor in helping do that, and in helping entrepreneurs launch their startups, as 80% agreed that “the ability to reach customers and potential customers [via online advertising] was an important factor in starting my business”

With the risks associated with starting a business quite high – and the fact that the startup rate in the U.S. remains quite weak – politicians need to fully understand how the modern tools of the digital economy are being used by entrepreneurs to start businesses and reach the customers who want to buy their products or services. Digital advertising is one of those affordable and effective tools.

Of the startups surveyed in our report, 90% agreed that “Online advertising has provided my business with an affordable option to launch and/or grow my business,” and 86% agreed that it is “important to my business survival and growth.”

Of existing small businesses that use online advertising, these firms report savings in ad budget costs, as well as in time that is spent on research, execution, and tracking results. Seventy-four percent of small business owners in the survey reported advertising cost savings, with 28% of small businesses saving $1,000 to $5,000 each year and 16% saving under $1,000 on a yearly basis.

Regarding labor costs, entrepreneurs report that employee hours saved each week average 10.93 hours. Business owners also report that due to the efficiencies of online advertising they get more of their own time back, on average 9.28 hours each week. Time is the entrepreneur’s most precious resource, and more time spent innovating, managing, and growing the business, means a greater opportunity for growth and success.

According to the estimates in our report, employee and owner hours saved add up to $3.1 billion each week, and $162.8 billion annually. These are resources that business owners are re-investing back into growth-producing opportunities. For example, 42% of small businesses owners reported searching for or investing in new growth opportunities, 31% have invested in new equipment to improve competitiveness, 29% have increased wages or benefits for employees, and 22% increased the size of their staff.

So, for example, as the 47 Attorney Generals (AGs) from around the nation probe Facebook’s practices as part of their antitrust probe, which they state in a media release “may have put consumer data at risk, reduced the quality of consumers’ choices, and increased the price of advertising,” they may also want to explore the benefits of digital platforms, of which Facebook is the most commonly used one by small businesses (84% of small businesses in the survey). Online platforms are actually expanding advertising choices and reducing costs for small businesses, which provides more choices to consumers from a diverse range of small businesses.

According to the survey, 89% of small businesses said a key benefit of online advertising is finding new customers leading to new sales, and 82% said it helped them more effectively compete with larger businesses. Notably, 73% of small businesses stated that without online advertising “it would impact my ability to effectively market my products and services and to grow my business.”

If government wants to do something to help small business thrive in the digital economy, it can work to create a federal framework for privacy and data protection. Fifty states doing their own thing would not only be a disaster for the U.S. digital economy, but it would be costly and unworkable for small businesses.

Upending the digital ecosystem through rash or intrusive government action would have costly consequences for small businesses. That is something all elected officials and government regulators need to keep in mind as they go after “big tech.”

Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council. Listen to her latest SBE Council-Forbes Book Radio podcast on the new online advertising report: The Digital Boost to Small Businesses.  Follow her on Twitter @KarenKerrigan


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