COVID-19 Demand Shocks Revisited: Did Advertising Technology Help Mitigate Adverse Consequences for Small and Midsize Businesses?

TL;DR

This study investigates how online advertising technology influenced the survival of small and midsize businesses during COVID-19 lockdowns, revealing that such technology mitigated some adverse effects globally.

Contribution

It provides the first large-scale empirical analysis of online advertising's role in helping SMBs survive during pandemic-induced lockdowns across multiple countries.

Findings

Lockdowns increased SMB closures worldwide.

Online advertising technology reduced the risk of SMB closure.

Effects varied by country, industry, and business size.

Abstract

Research has investigated the impact of the COVID-19 pandemic on business performance and survival, indicating particularly adverse effects for small and midsize businesses (SMBs). Yet only limited work has examined whether and how online advertising technology may have helped shape these outcomes, particularly for SMBs. The aim of this study is to address this gap. By constructing and analyzing a novel data set of more than 60,000 businesses in 49 countries, we examine the impact of government lockdowns on business survival. Using discrete-time survival models with instrumental variables and staggered difference-in-differences estimators, we find that government lockdowns increased the likelihood of SMB closure around the world but that use of online advertising technology attenuates this adverse effect. The findings show heterogeneity in country, industry, and business size, which we discuss and is consistent with theoretical expectations.