Social Media Engagement, Online Ads and AI Fuel Small Business Sales and the Economy

By SBE Council at 22 May, 2025, 10:54 pm

SMALL BUSINESS INSIDER

by Raymond J. Keating –

It shouldn’t be news to anyone that social media has helped generate rather dramatic changes in the relationship between producers and consumers. That is often called the experience economy, whereby personalized interactions have grown in importance. In today’s competitive environment, small business owners are well aware that they need to deliver engaging customer experiences to both attract and retain customers.

As noted in SBE Council’s recently released Small Business Technology Use Survey, small business owners identified “social media marketing” and “word-of-mouth marketing” as the advertising techniques that have the highest return-on-investment for sales and sales leads. Tech platforms and the vast tools they provide have enabled small businesses to more efficiently engage customers and leverage positive experiences to attract new prospects and customers. That includes personalized advertising, where artificial intelligence (AI) is becoming more valuable in creating ads that appeal and connect with customers’ needs and values.

A new study published by Meta helps to quantify this benefit by estimating the amount of revenue generated for an advertiser for each dollar spent on the tech platform’s ads. These personalized ads – sharpened by AI – create ads that are “better aligned” to customer’s interests where they have “a better experience,” according to Meta.

The study reported: “Research published with the National Bureau of Economic Research (Tadelis et al., 2023) finds that each dollar spent on Meta ads led to $3.31 in revenues for U.S. advertisers in 2022. We replicated this analysis in 2024 and found that each dollar spent on Meta ads led to $3.71 in revenues for U.S. advertisers in 2024. Multiplying this by total U.S. Meta ad spending yields over $215 billion in business/advertisers revenues in the U.S. from Meta ads.”

Using methodologies from U.S. Bureau of Economic Analysis, Meta estimated that $548 billion in economic activity and 3.4 million total jobs are “linked to US supply chains relying on our platforms in 2024.” The firm goes on to reasonably argue that this is a conservative estimate as the numbers “do not include the economic value that our free services deliver to our users.”

It’s not surprising that Meta also reported that small and medium sized businesses account for 98.4 percent of businesses that use Facebook. This aligns with the fact small businesses dominate the U.S. economy – 98.2 percent of U.S. firms (both employer and nonemployer enterprises) have fewer than 20 employees. As a side note, regular SBE Council surveys – including our recent technology use survey – found that Facebook is “the most important” tech platform for income generation and branding among small business owners. Instagram comes in second to Facebook in the “most important” category.

Meta reported the following about its users, which are overwhelmingly small businesses:

• “73% of businesses that advertise consider digital advertising to be the most effective for their business.”

• “Among businesses in the United States that use Facebook: 2,918,000 use AI products regularly to streamline their operations.”

• “44% use AI tools primarily for advertising or marketing.”

So, when policymakers seek to impose invasive regulations on the AI ecosystem or on large technology firms like Meta – whether in trying to dictate how online advertising or AI should work or limiting options for entrepreneurs, businesses and investors via antitrust regulation – they are overriding the decisions made in the marketplace by consumers, entrepreneurs, businesses and investors with political preferences, thereby raising costs, ramping up risks and uncertainties, and limiting choices.

Make no mistake, small businesses suffer under such conditions and the overall economy does as well.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of “The Weekly Economist” book series, and 10 Points from Walt Disney on Entrepreneurship.