J. Landress Brass sells, restores, repairs and fabricates brass instruments out of Manhattan.

Owner Josh Landress said it's the last store of its kind in New York City.

"New York being a really big city is still a small market for specialized brass instruments and brass musicians," he said.

Especially as music venues and Broadway shut down during the COVID-19 pandemic, Landress said he realized he needed to find new customers all over the state, country and world. That's when he turned to targeted digital advertising online. 

"I need to be able to find those people out there, and without having access to those ads and that reach to that market, it would be detrimental to my business and other businesses like mine," Landress said.

A new report by advocate organization Connected Commerce Council suggested targeted digital ads are crucial to the majority of small and medium-sized businesses. Of 1,200 surveyed, 69% said they use the ads to find new customers and 59% said they're more effective than ads on other traditional media platforms.

"If I have to advertise to people who may or may not be interested in my product, that costs me more and that cost is just going to get passed along to the consumer," Syracuse University Associate Professor of Advertising Beth Egan said.

Congress is considering legislation called the American Privacy Rights Act, which would regulate the data websites collect. Connected Commerce said a national privacy law is needed to supersede the current patchwork of state laws, but is concerned if companies are barred from collecting certain information targeted advertising would become far less effective. 

"The challenge that we're finding as an industry is that the folks drafting the legislation don't truly understand how the digital advertising ecosystem works, therefore they're not taking into consideration the real-world ramifications of small businesses needing to adhere to the structure that they have in place under the current guidelines," Egan said.

According to the survey, about 20% of small and medium-sized businesses anticipate they would have to close if they could no longer use targeted digital ads and roughly the same proportion would anticipate layoffs. Landress said he is a big supporter of privacy and won't even collect credit card information over the phone, but he needs to be able to reach his customer base.

"In print ads and advertising in magazines and on TV and on billboards just doesn't work for my type of business anymore, so it's all online," Landress said.

According to the survey, publishers also count on digital ads for a significant portion of their annual revenue. Landers said restrictions on personalized marketing could lead to more subscription models, paywalls and fewer options for readers.