PurposeThe purpose of this paper is to provide some insights regarding the adoption of internet advertising by Iranian small and medium‐sized enterprises. The recent negative trends leading to a lack of competitive advantage in small businesses and the advantages of internet advertising makes it imperative to study various factors affecting this area of marketing.Design/methodology/approachThis study reviewed 59 previous related studies, resulting in a comprehensive theoretical framework which explains the advantages of internet advertising for small to medium‐sized enterprises (SMEs). Via questionnaire, the paper compiles 346 Iranian experts’ opinions in order to test the validity and applicability of variables in Iran. A structural equation model and LISREL software were used to analyze the data.FindingsA total of seven latent variables of internet advertising adoption were examined: advertising agencies, internet publishers, small and middle‐sized enterprises, government role, e‐commerce development and user types. The paper found that these constructs successfully explain internet advertising adoption by incorporating readiness and globalization stages. The small and medium‐sized enterprises were found to be the most significant for explaining internet advertising adoption.Research limitations/implicationsThe sample was restricted to Iranian experts.Originality/valueThis study offers one of the first attempts to build a comprehensive theoretical model explaining internet advertising adoption. Second, this study offers a new scale for internet advertising adoption with higher content validity.