MSMEs boost digital ad spend 21% YoY on measurable ROI, lower barriers & AI

Small and medium businesses are emerging as a major force shaping India’s digital advertising landscape, with their ad spends rising sharply as more enterprises shift marketing budgets online.

According to the Pitch Madison Advertising Report (PMAR) 2026, digital advertising spends by MSMEs reached Rs 35,814 crore in 2025, marking a 21% year-on-year increase. The segment now accounts for nearly 38% of total Digital AdEx under the expanded definition, highlighting the growing contribution of smaller businesses to India’s advertising ecosystem.

The report estimates that India’s advertising market reached Rs 1,15,291 crore in 2025 under the legacy definition, growing 7% year-on-year. However, digital continues to be the primary growth driver, with MSME advertisers forming a significant share of incremental spending.

The momentum is also aligned with the broader policy push toward strengthening smaller enterprises. The Union Budget 2026–27 reinforced the government’s focus on MSMEs as a growth engine for the economy, with Finance Minister Nirmala Sitharaman announcing a Rs 10,000 crore SME Growth Fund and a Rs 2,000 crore top-up to the Self-Reliant India Fund to improve access to capital for smaller businesses.

Read more on Budget push for MSMEs

Industry experts say the rise in digital ad spends reflects a structural shift in how smaller businesses approach marketing. With digital platforms offering measurable outcomes, lower entry barriers and self-serve tools, MSMEs are increasingly using online advertising to reach customers directly.

Dinesh Gulati, COO, IndiaMART InterMESH Limited, said, “The triggers for this behaviour remain multiple. From product and tech simplicity to AI reducing entry barriers to the advertising world, digital is increasingly becoming central to an MSME’s business strategy, rather than an add-on or good-to-have channel.”

He explained that unlike traditional media, digital advertising offers granular tracking, making ROI easier to measure and enabling brands to optimise campaigns in real time. He added that Gen AI tools are simplifying ad management through automated copywriting, creative development and video editing, while AI-driven chatbots are enabling conversational commerce. Gulati further noted that marketplaces and e-commerce platforms now offer integrated advertising tools, along with solutions like WhatsApp Business and CRM systems, helping businesses expand their reach without large marketing budgets.

The digital-first content economy

This was echoed by Sarvadnya Kulkarni, CEO and Founder of General Instruments Consortium, a manufacturer of primary process control instruments in India and overseas. He noted that MSMEs have fundamentally changed how they approach growth in recent years, with digital becoming central to customer acquisition, brand building and market expansion. Kulkarni added that initiatives such as ONDC, UPI-led commerce, the rise of D2C models and easier access to performance marketing tools have made digital advertising more measurable, affordable and scalable for MSMEs, making the current growth momentum sustainable.

Impact on India’s digital ad ecosystem

Beyond individual businesses, experts say the rise in MSME spending is also reshaping the broader digital advertising ecosystem.

According to Kulkarni, the rise of MSME spending is decentralising India’s digital ad ecosystem. Earlier, large enterprises dominated ad spends. “Now, thousands of smaller, agile businesses are competing for the same consumer attention. This increases competition for ad inventory, pushes platforms to innovate for vernacular and regional targeting, and shifts power toward performance-driven advertising rather than brand-heavy campaigns,” he said. 

Agencies also highlighted this shift. Ritz Mallik, Founder of Ritz Media World said, “Since MSME’s have entered the Digital realm, we have seen a major shift in advertising optimisation and consumer preferences. Most MSME’s are D2C brands that drive traffic from hyperlocal sources.”

Mallik pointed out that the rise of smaller digital-first brands is enabling more niche, culturally specific products to gain traction, making it harder for large brands to rely solely on mass-market appeal.

He further noted that the current growth reflects both structural and cyclical shifts in India’s advertising market. Rising internet penetration, improving digital literacy, a more confident consumer base and easier access to AI-driven tools are enabling businesses to better understand and reach customers. While slowdowns may occur, stronger digital connectivity and hyperlocal engagement are helping businesses sustain growth.

Shift in local media budgets?

At the same time, the shift toward digital is also influencing how MSMEs allocate marketing budgets across media channels.

Businesses that previously relied on regional print, outdoor or local promotions are now allocating a larger share of budgets to online channels that allow targeted reach and performance tracking.

Tamanna Gupta, Guest Faculty at IIM Bangalore and Founder of Umanshi Marketing, a Mumbai-based marketing agency for startups and SMEs, said the shift is less about abandoning traditional media and more about clearer role definition. She explained that digital has become the primary engine for customer acquisition due to sharper targeting and measurable outcomes, allowing MSMEs to track leads and calculate cost per sale.

Traditional formats such as print, radio and outdoor, she noted, continue to play a credibility role in certain local markets but largely serve as reinforcement rather than the main growth driver. However, Gupta added that categories like real estate, education and political campaigns still lean heavily on traditional media, where large-scale visibility and local recall remain critical.

“Overall the shift is happening but it’s not emotional. MSMEs are simply using each medium for what it does best. Digital to generate business. Traditional to strengthen perception,” she said. 

She added that expanding internet penetration in Tier 2 and Tier 3 markets has played a significant role in accelerating MSME digital advertising. According to her, businesses from smaller towns are increasingly using digital platforms to reach customers beyond their local markets and build national footprints without the need for physical expansion. For many of these enterprises, digital channels have become the primary engine for growth and customer acquisition.

The future?

Experts believe that as digital tools become more accessible and platforms continue to build solutions tailored for smaller businesses, MSME participation will remain a key driver of digital ad growth.

Mallik noted that while MSMEs have long driven economic growth globally, they remained a silent majority as attention focused on large corporations. With digital now seen as a core business necessity, their growing participation is reshaping digital advertising and consumer behaviour. Gupta added that as MSMEs increasingly adopt performance-led marketing, e-commerce platforms and AI-driven tools, their role in India’s digital advertising ecosystem is expected to become even more significant in the years ahead.

Kulkarni added that with the digitisation of consumer demand, especially in Tier 2 and Tier 3 markets, along with improved access to marketing tools, data and MSME credit, smaller businesses are becoming better equipped to scale their marketing efforts. As a result, he noted that MSMEs are increasingly positioning themselves as key drivers of growth in the digital economy going forward.

According to Gulati, the growing visibility of MSMEs reflects how digital entry barriers for small businesses are steadily reducing with the support of the right initiatives and technology.

“Businesses today no longer need an expensive creative agency or a media planner, owing to better accessibility and affordability. This clearly indicates that this change is here to stay,” he concluded.