Digital marketing has replaced traditional marketing approaches due to an increase in the access to internet and communication technologies across the globe. In addition, it has created an opportunity for SMEs with limited market and funding to promote their brand across different regions, supporting balanced regional development. In this context, Saudi Arabia has been promoting the growth of SMEs through various initiatives as a part of its vision 2030 programme. Accordingly, NEOM city, a multi-billion project was launched to support businesses, innovators, entrepreneurs, and researchers by proposing the city as a hub for international entrepreneurs. However, it is unclear how the local SMEs and their approaches toward digital marketing would be impacted, and how the city can support them. This paper analyses and evaluates the impact of digital marketing on SMEs performance in Saudi Arabia, and its implications for developing NEOM city. An online survey questionnaire instrument was used for collecting data from 358 entrepreneurs and business owners categorised under SMEs. Low-cost marketing mix with techniques such as email marketing, social media marketing are preferred by SMEs. Cultural, economic, and technological are the major factors identified influencing the adoption of digital marketing by SMEs. Digital marketing reflected more positive impact on strategic performance (customers and employees’ satisfaction) than financial performance (profitability and sustainability) of Saudi Arabian SMEs. Saudi Arabian SMEs reflect their readiness and preparedness to reap the benefits from the Saudization programme, with a few minor issues related to socio-cultural, technological, and labour challenges.