Small advertisers stick with what they know during a recession – and what they know is Facebook.
As of January, Facebook had more than 8 million active advertisers on its platform, of which multiple millions are no doubt small and medium-sized businesses. Facebook doesn’t break out how many SMBs there are in its overall advertiser base but, in 2017, Sheryl Sandberg did share in passing that more than 4 million SMBs advertise on Facebook. That number can only have gone up.
And SMBs are in a world of pain right now. Small businesses are typically hit the hardest during an economic downturn.
This isn’t a typical economic downturn, though – it’s a health crisis attendant with massive uncertainty. Small businesses are being forced to close their doors and rapidly transition their services online – if they can. Advertising is likely low on the list of priorities right now.
But Facebook, despite its exposure to the SMB market, is uniquely positioned to weather this unprecedented storm, said Jasmine Enberg, a senior analyst at eMarketer.
“Facebook is certain to take a hit in the short term – the platform is primarily self-serve, which means it’s easy for these smaller advertisers to pull their advertising if they need to,” she said. “At the same time, though, it’s just as easy for advertisers to start spending again when this is all over.”
Not for granted
Still, if large swaths of SMBs go out of business, they won’t exist in order to spend again.
Last week, Facebook launched a $100 million grant program for small businesses affected by the coronavirus, $40 million of which will go to help around 10,000 businesses in the United States alone. Most of the money will be doled out as cash, but ad credits are on offer too.
Facebook is also introducing digital gift cards for local businesses and expanding its fundraising tools to give people a way to support businesses in their communities.
But Michelle Klein, Facebook’s VP of global business and customer marketing, acknowledges that the most important thing SMBs need right now is a quick infusion of cash.
According to a report released Tuesday by the Federal Reserve Bank of New York, 17% of small businesses say they only have enough cash reserves on hand to survive for two months before having to close down or sell – and that was before the coronavirus crisis started. The Fed’s data is based on survey responses collected during the last two quarters of 2019.
“We just want to support businesses through this time and giving cash is a key part of this strategy,” Klein said. “Ad credits are there for people to use if they want to try out our ad products, but the majority is cash, because we know that’s what they need.”
Klein declined to share how SMB ad spending is trending on the platform. But she did note that Facebook has around 140 million businesses, many of which are SMBs, using one or more of Facebook’s free apps and services every month, and that some small businesses are actually thinking about spending more right now.
Nate Martin, owner of Magnolia Room Tucker, a cafeteria-style restaurant in Atlanta, recently posted in a business leaders group on Facebook that now is “a great time for exposure,” because everyone’s glued to their phones.
“Collect data, get leads. This situation will pass,” Martin wrote. “I own a restaurant and took a hit over the weekend and am uncertain of the next few weeks, but I feel it is best to keep my foot on the gas and when this blows over (and it will) we will pick right back up where we were at, if not stronger because of the extra eyeballs.”
Give and take
Although Facebook deserves kudos for the efforts it’s making to support SMBs, Enberg notes a long-term strategy at play.
“Facebook is reliant on small businesses to keep their own advertising business afloat, so making sure that SMBs can get through this crisis will help them return and advertise on Facebook once the worst is over,” she said.
SMBs are already well familiar with Facebook, which is a measurable source of media, a primary channel for their customer acquisition, easy to use – and that won’t change, said Elgin Thompson, managing director of technology investment banking at JMP Securities.
Eventually, when businesses are fully operational again, SMB ad spend on Facebook will actually probably increase, he said.
“No one is COVID-proof, even Facebook,” Thompson said. “But on the other side of this, businesses that have been shut down for weeks or months will need to reinvigorate demand, and what’s the most ROI-focused way to do that? Basically, Facebook.”