Online advertising has become a driver of businesses’ customer acquisition, ecommerce, and competitiveness around the world, including in Australia. Online advertising can enable Australian small and medium enterprises (SMEs) to build brand awareness, scale, and reach new markets faster than traditional marketing methods. For remote SMEs, online ads can bridge the disadvantages of distance, limited local demand, and high fixed marketing costs. Today’s AI-powered online ads can augment these gains through automation and enhanced targetability.

 

Focus on the potential of online ads for Australian SMEs is timely in light of Australia’s current policy discussions and initiatives on:

 

• Unlocking economic growth and competitiveness. Australia’s productivity growth has stagnated in recent years. The Business Council of Australia and the Productivity Commission alike have highlighted the importance of digital services and AI and broad-based access to them as a means to jumpstart Australia’s productivity growth.

 

• Enhancing SME productivity and exports. SMEs make up about a third of Australia’s GDP and 42 percent of employment. There is considerable concern in Australia about SMEs’ productivity gap and efforts to bridge it through digital transformation and export support. The government has various initiatives such as Digital Solutions grants to enable SMEs to use digital marketing and other digital services to reach new customers and grow more competitive.

 

• Promoting remote SMEs’ digital transformation, access to markets, and growth. About a third of Australian companies are in regional and remote areas, and they typically also struggle with digital transformation more than metropolitan firms do. Per the 2025 National Small Business Strategy, national, state, and territory governments are working to scale their support to enable remote SMEs to use digital services and access new markets.

 

Online ads can promote Australia’s key priorities to drive productivity, SME growth and exports, and regional development. However, there is limited empirical evidence to date on how different types of Australian SMEs already use online advertising, what gains online ads generate for SMEs and the Australian economy, and how government policies and programs could promote the use of online ads as an SME productivity driver.

 

The purpose of this report is to bridge this knowledge gap and promote policies and programs conducive to SMEs’ use of online ads in Australia. The report (1) reviews the results of a survey with 1,100 Australian SMEs on their online ads use and gains from online ads; (2) estimates the broader economic and productivity gains from online ads for the Australian economy; and (3) promotes policies and programs conducive to Australian SMEs’ use of online ads.

 

The main findings are as follows:

 

• Australian SMEs invest in online ads as a key success driver for their businesses. Over three-quarters of Australian SMEs already use online ads and another 21 percent plan to adopt them in 2026. Among users of online ads, over 60 percent of micro and small firms and 86 percent of medium firms spend at least three percent of revenue on online ads - and 37 percent and 54 percent respectively, spend five percent or more.

 

• SMEs use a wide variety of ad formats and providers. Most SMEs use multiple ad formats and providers - as many as 93 percent use three or more providers and 68 percent use six or more. In addition, 43 percent of micro and small and 77 percent of medium firms use external advertising agencies, the vast majority of them Australian microenterprises, to help run their ad campaigns.

 

• Online ads promote SMEs’ return on investment in ads, customer acquisition, and revenue and export gains. A majority of SMEs find that online ads outperform physical ads, such as in terms of tracking the impact of ads, return on ad investment, and customer retention. SMEs investing robustly in online ads are significantly more likely to achieve faster revenue growth, diversify their exports, and amplify their ecommerce sales than their peers, controlling for other factors that affect firm performance.

 

• AI amplifies the impact of online ads on SMEs’ business outcomes. So far, 40 percent of micro and small firms and 52 percent of medium firms use AI in online advertising initiatives, mainly for fraud prevention, targeting, and analytics. SMEs that integrate AI into their ad initiatives have significantly higher revenue growth and export intensity  than their non-AI using peers.

 

• Overall, SMEs’ use of online ads contributes conservatively A$152 billion to Australia’s economy each year. SMEs that use online ads attribute roughly 10-13 percent of their revenue to online ads. This spending is equivalent to 7 percent of total Australian SME revenue and equivalent to about 8.3 percent of Australia’s GDP. In addition, if all Australian SMEs used online ads and at least 20 percent more spent at least five percent of their revenue on online ads, the gains from online ads could increase to A$231 billion, equivalent to 12.6 percent of Australia’s GDP.

 

• SMEs want the government to support their ad usage through training on AI use in ad campaigns, guidance on compliance with privacy and data laws, and information on regulations related to online ads. SMEs’ adoption of online ads is constrained by limited budgets, skills gaps, and fraud risks. SMEs have strong demand for government support in AI training and regulatory guidance around data privacy and ads regulations. Over one-half of SMEs see the government as offering useful guidance and resources for online advertising, a base to build upon.

 

Given the significant macroeconomic contribution of online advertising, Australia should treat SME digital advertising capability as a driver of national competitiveness and integrate it closely into SME productivity, export growth, and digital trade strategies.

 

In particular, policymakers could promote targeted training programs on optimizing online ads and AI-driven advertising tools and analytics; provide scalable guidance on privacy, data, and online ad regulations; and develop trust-building frameworks to reduce fraud, impersonation, and misleading ads that disproportionately affect smaller firms. There is also an opportunity to deepen support for accessing affordable digital tools, shared measurement platforms, and advisory services, leveraging Australia’s strong ecosystem of SME ad agencies.