• by Laurie Sullivan , Yesterday

on and Wall's research note published Monday, analysts estimate small advertisers account for 38% of total U.S. social-media advertising revenue across Meta Platforms. The dynamic is likely similar in many of the digital service tax markets, because the small business relies heavily on large platforms like Meta for convenience.

Earlier this month, Meta Platform announced it would add “location fees” to ad buys targeting users in six countries, passing on costs of Europe's digital services taxes (DST) to advertisers that takes effect in May.

Countries with digital service taxes -- including the U.K., France, Italy, Spain, Austria and Turkey -- represented about 13% of Meta's total global revenue in 2025, with most coming from the U.K., according to Madison and Wall estimates, so the “tax is a small percentage surcharge applied only to campaigns delivered in markets representing roughly 13% of Meta’s global revenue.”

Although the overall impact on Meta’s growth will likely be modest, per the report, it could hurt small businesses because of the way the technology company will recoup the ad DST, which was introduced as a way for countries to earn revenue. The tax will add complexity to billing, especially for small businesses.

There’s also a possibility that total ad spend could exceed a marketer’s planned campaign budget because the surcharge is applied after the ad is delivered. That may create friction for some advertisers, according to Madison and Wall.

“Some small businesses may not initially be aware of the policy change, which could lead to unexpected charges and potentially discourage future spending,” the analysis stated.

The policy also could slow adoption of Meta’s automated buying tools like Advantage+.

Complexity comes in the way Meta will apply the DST as a separate, post-campaign expense, rather than factor it into the optimization processes used by its AI systems.

This process optimizes campaign budgets and allocations as if taxes do not exist, since they are applied after ads are delivered. Return on ad spend (ROAS) will show lower than what marketers initially see in their dashboards, according to the report.

The analysis also suggests advertisers might exclude those markets or attempt to adjust bidding rules to account for the tax.

Many marketers may question whether they have sufficient control over geographic allocations in automated campaigns to offset the higher cost, according to the report, and some advertisers may be more reluctant to relinquish that type of control.

Other tech companies also apply the tax, but Google began adding these as separate line items on monthly invoices in early November 2020 for the U.K. and Austria. The fee is a percentage of the media cost, such as clicks or impressions for ads actually served in the taxed country, as listed on a help page.

Amazon began charging Regulatory Advertising Fees to advertisers in August 2024 to offset government-imposed DST, and also has a help page.