SMEs say they lack the tools or expertise to fully capitalise on online advertising. Here are five practical ways to close that gap in 2026, based on new research.
What’s happening: A new report commissioned by Google and conducted by NexTrade has found that online advertising currently delivers approximately $152 billion in annual revenue to Australian small and medium businesses.
Why this matters: The research suggests the difference between average and strong performance comes down to a small number of specific capabilities that any business can build.
Australian small businesses are already generating an estimated $152 billion in annual revenue through online advertising, but new research suggests that figure could grow to $231 billion if more businesses closed the gap between how they are currently using digital advertising and how effectively they could be using it.
The finding comes from a report titled Gains from Online Advertising for Australian Small and Medium Enterprises, commissioned by Google and conducted by NexTrade, based on a survey of 1,100 Australian SMEs. With more than three quarters of small businesses already using online advertising and a further 21 per cent planning to adopt it in 2026, the opportunity is not about getting started. It is about getting more from what is already in place.
The research identifies five practical ways small businesses can close that gap this year.
The gap worth closing
Before getting to solutions, it is worth understanding the scale of what the research describes. Ninety per cent of SMEs surveyed cited limited budgets as a key challenge, while 83 per cent said they lack the internal digital tools or technical expertise to fully capitalise on online advertising. Those two constraints, money and capability, are driving most of the $79 billion gap between current performance and potential.
Bec Turner, Government Affairs and Public Policy Manager at Google Australia, said the productivity implications extend well beyond individual businesses. “If Australia wants to lift productivity, helping small businesses build their digital skills has to be part of the solution,” Turner said. “Online advertising gives SMEs a practical way to reach customers, grow revenue and compete more effectively. When paired with tools like automation and AI, it can also help business owners save time and make smarter decisions about where to focus.”
Five ways to close it
The research, combined with practitioner experience from SMEs already seeing strong results, points to five specific actions small businesses can take in 2026 to improve their online advertising performance.
The first is to start with the basics and audit your own digital presence as a new customer would. Search for your business the way a potential customer might, identify any missing or inconsistent information across platforms and fix it. Make sure phone numbers are clickable on mobile and that booking or payment options are as straightforward as possible. These foundational steps cost nothing but directly affect how well paid advertising converts.
The second is to sharpen your message around your best customers. Identify the one or two customer types that drive the most value for your business and update your copy, whether on your website, your ads or your social profiles, to speak directly to them in clear, simple language. Vague messaging is one of the most common reasons advertising spend underperforms.
The third is to let AI do more of the heavy lifting. The research found that among the 40 per cent of micro businesses and 52 per cent of medium sized businesses already integrating AI into their online advertising strategies, stronger revenue growth and higher export intensity than their peers was consistently reported. AI tools can help draft ad copy, generate image ideas and optimise targeting without requiring a large marketing team or significant additional budget.
Jemma Mrdak, a small business owner running a digital agency, says the accessibility of these tools has changed what is possible for smaller operators. “Online advertising has allowed me to reach clients beyond my immediate network and compete with much larger agencies, without needing a big budget. Being able to see what is working and adjust in real time gives small businesses a real sense of control over their growth,” Mrdak said.
The fourth is to track what actually matters. Many small businesses monitor digital advertising through metrics like impressions and clicks without connecting those numbers to tangible business outcomes. The research recommends tracking performance against sales and enquiries directly, giving a clearer picture of which campaigns are generating real return and which are consuming budget without result.
The fifth is to stay across regulatory and platform changes. When asked how government could best support their digital capability, SMEs surveyed prioritised AI training, clearer guidance on privacy and data laws, and better communication around advertising regulatory changes. As platforms update their tools and privacy regulations evolve, small businesses that stay informed are better positioned to adapt their strategies without disruption.
Where AI makes the difference
The performance gap between SMEs using AI in their advertising and those that are not is one of the clearest findings in the research. Businesses integrating AI for fraud prevention, targeting and analytics are reporting stronger revenue growth and higher export intensity than their peers, according to the report.
For small business owners who have not yet explored AI advertising tools, the barrier is often perceived complexity rather than actual cost or difficulty. Most major advertising platforms now include AI-assisted features as standard, and the research suggests even basic adoption is producing measurable results.
Mrdak describes the day-to-day reality for small businesses navigating this environment. “Digital marketing has changed so quickly over the past few years. New tools, AI features and platform updates are constantly being introduced, and for a small business that can feel like a lot to navigate while you are also running day to day operations,” she said. “Having clearer information and practical support makes it much easier to make confident decisions about where to focus.”
The research also signals where small businesses need external support to close the gap. AI training, clearer privacy and data guidance and better communication around regulatory changes were the three most commonly cited government support priorities among SMEs surveyed.
Turner said meeting those needs requires coordination between industry and government. “To make the most of that productivity opportunity, industry and government need to continue working together. That means practical skills training, clear and consistent regulation, and targeted support to ensure small businesses have the confidence and capability to get online,” she said.
For small businesses already using online advertising, the research makes a clear case that the return on closing the capability gap is significant. The $79 billion difference between where Australian SMEs are and where they could be is not primarily a budget problem. It is a skills and confidence problem, and one that five practical steps can start to address right now.
This report was commissioned by Google and conducted by NexTrade. The full report is available here.
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