Media and Business Demographics

Larger businesses and small ones aspiring to operate nationally or globally drive advertising

If I reference “demographics” In the context of marketing, most people will think about consumer demographics.  Of course, consumer demographics are critical for marketers to understand, but if we’re trying to study the media industry and advertising in particular, we need to pay more attention to business demographics because the buyers of advertising services and products are businesses, not consumers. 

I mentioned yesterday how regionally-constrained businesses becoming national or global is one factor which has negatively impacted media owners whose media properties are regionally constrained.  That’s one example of a business demographics trend, although it’s hard to quantify

An overlapping trend that I can quantify which relates to the above is the increasing role of larger businesses in any given economy.   Although society tends to laud small businesses, rightly or wrongly the reality is that larger ones take share over time, and it’s generally true in every country whose data I’ve looked at in the past.  

For example, in the US, using employment or payrolls data from the Census Bureau as a proxy for economic share we can see how companies with 500 or more employees grew from 45% of all employment in 1988 to 54% in 2020, with payrolls rising from 51% to 62% during that same period.

Source: Madison and Wall analysis of US Census Bureau data

While it’s a different data set and covers a different period of time, data from the IRS shows that total receipts from businesses with more than $250 million in annual receipts, whose advertising budgets average approximately $30 million annually, grew their share of the overall economy’s receipts from 64% to 69% between 2004 and 2019 (the most recent year for which their data is available).   Businesses with under $50 million in receipts, whose advertising budgets average closer to $10,000 annually, saw a decline in share of economic activity over that same time, falling from 26% to 21%.

It is important to note that the share of advertising spending didn’t shift anywhere near as dramatically over the same period, as the share of spending on advertising from small vs. large businesses stabilized after 2014, coinciding with Facebook’s aggressive efforts to support small businesses use of self-service advertising tools. My guess is that this probably represented a source of new incremental spending for many small businesses.

None of this is to say that selling ads to small businesses is in any way a bad one – clearly Meta and Alphabet have done well for themselves doing so over the past two decades – but if you’re trying to bet on where the bulk of spending growth will go in the future, it seems safe to say it’s the larger businesses and the small ones aspiring to be larger on a national or global stage who are best positioned to drive growth for media companies into the future.