The Rise Of Small Companies Gaining A Worldwide Reach

Fifth Third Bank

 

By: Elizabeth MacBride

One in four of the 5 million active advertisers on Facebook has run a campaign targeting people in another country. The number, provided exclusively to me and Forbes.com, is a sign of the way that technology enables smaller businesses to operate internationally. Historically, a much lower percentage of small businesses has been able to trade cross-border.

The data provided by Facebook also shows the increasing importance of Facebook’s ability to target internationally. And, the way Facebook’s ad targeting has evolved as it expands internationally also shows that the racial categories people use matter less than we think.

More than 1.2 billion people on Facebook are connected to a small business in another country, the company says. There are still many legal obstacles – shipping, and customs, for instance — for small businesses that want to sell across borders. But technology is helping to enable a new kind of company: the micro-multinational, tiny companies that can piece together their markets from like-minded consumers across regions. Traditionally, only a tiny portion of U.S. small businesses have exported – under 10% — but reports on the customer base of companies like Facebook and eBay show a different story. For instance, 85% of the small businesses on eBay sold across borders.

Facebook, the OECD and the World Bank found in its Future of Business survey that small businesses that trade internationally are more confident and more likely to increase jobs, and 58% of those exporting said using online tools for selling internationally had increased their revenue.

Facebook announced a major expansion of its international advertising only a year ago, when it started offering lookalike audience across borders. (Lookalike audiences give Facebook advertisers a chance to automatically target groups of consumers based on the characteristics of the customer groups the business has already found to be fruitful). In May, Facebook started offering multi-city targeting, so a small business can target say, consumers in Rio, Dubai and Shanghai and New York if it wanted.

They are small business people like Sai Durga, who runs a shop in Hyderabad, India. She sells Indian gifts, like thamboolam bags, posting pictures on the Facebook page, with a customer base in other cities in India and among people with ties to India who live in the United States. “To know the price, simply send a Facebook message. To place an order, dial WhatsApp,” the caption under one photo reads.

Durga, a mother of two who has also lived in the States, started the business in 2014 when she was a stay-at-home mom, opening her physical shop this summer, she told me via email — and also wanted to emphasize how grateful she is to Facebook.  “We were planning a cradle ceremony for my second daughter,” she wrote. “And I was then looking for some kind of uniqueness in the gift all I could find is the regular and boring stuff. To make it a bit interesting I tried to make a cradle shaped invitations and gift boxes for the cradle ceremony.”

With revenue of less than $50,000, she has two people working for her and 10 women who work from their homes producing the gifts.

Stories like hers and the stats that show reflect the way that technology – including social media – is leveling the landscape for small businesses. One of the fascinating things is how small an obstacle “culture” is turning out to be for sales. Over the years, almost every small business owner I’ve ever interviewed who identifies a market for the purposes of advertising uses race as part of their thinking. Business owners say something like this, “Our target market is white women, 25 to 45 years old.” But the way Facebook’s ad targeting is evolving reveals how much less it matters than we think.

Though people tend to make a lot of national and racial labels – and Facebook has come under fire for allowing businesses to use affinity-group labels, including African-American, Hispanic and Asian American in the United States — none of Facebook’s affinity group ad-targeting tools are used in its cross-border tools. Yet the ads still work fine, judging by the rate at which small businesses are using them. After the criticism, Facebook also removed the affinity groups from its ad targeting for housing, credit and employment.

Pro Publica deserves credit for bringing the Facebook setting to light initially, and Facebook deserves credit for changing course – but the fact that the affinity groups probably didn’t need to be there in the first place, and maybe don’t need to be there are all, is fascinating as a sign of the way algorithms reorganize our thinking.

Labels are a convenient and sometimes meaningful, and sometimes destructive shortcut for the human brain. Facebook’s ad targeting tools use a combination of human labeling, which business owners set, and an underlying algorithm, which sharpens the labels and groups based on the behavior of consumers.

But as it has expanded internationally, it has de facto shed some of the labels by not researching and including them in the settings offered to international businesses.

If you look at the patterns of use among the advertisers working across borders, you can even see some of the trade blocks developing among the micromultinationals. Not surprisingly, 580 million people around the world are connected to a business – meaning they’ve liked a business page — in the United States. There are other centers of micromultinationals.

  • More than 300 million people around the world are connected to a business in Germany. People living in the U.S., Austria, UK, Switzerland, Italy are most likely to be connected to German companies.
  • More than 360 million people around the world are connected to a business in the U.K. People living in the U.S., Australia, India, Germany and Pakistan are most likely to be connected to U.K. companies.
  • Nearly 200 million people from around the world are connected to a business in Australia. People living in the U.S., U.K., India, Canada and Pakistan are most likely to be connected to Australian companies.
  • More than 180 million people from around the world are connected to a business in Mexico. People from the U.S., Argentina, Spain, Peru and Colombia are most likely to be connected to Mexican businesses.

 

Facebook sent me a handful of examples of micromultinationals, including a German furniture company, Holzconnection, a German soap company called Brooklyn Soap Co., and an American outdoor gear company, SA Co., that works in 32 countries, and Kenya-based Funkidz, which has customers across Africa.

This article was written by Elizabeth MacBride from Forbes and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.