An analysis of recently-released IRS data shows that even as small and medium-sized business have increased ad spend at similar rates, advertising growth is chiefly coming from larger businesses.
“A common narrative we hear in relation to the growth of the advertising market is that much of it is due to increased spending from small and medium-sized advertisers which in turn have been responsible for much of the growth of Meta, Alphabet and Amazon,” financial analyst Brian Wieser says in his Madison & Wall newsletter. “In the United States, at least, this is not generally true.”
Using the data from 2020, Wieser breaks up the ad industry into small businesses generating less than $50 million in annual revenue, mid-sized generating between $50-$250 million, and the largest with more than $250 million.
Wieser's analysis notes that while small businesses' spend declined 12.2% in 2020, and mid-sized companies were stronger relative to the industry, the largest group – representing close to 9,000 businesses averaging nearly $2.7 billion in revenue and $28 million in ad expenses in 2020, accounting for 70% of the industry – grew 4.7% from 2011-2019, and essentially matched small companies' 12.2% decline.
Wieser concludes, “Rather than attributing growth in advertising to smaller businesses, it’s more likely that businesses which only emerged in the past couple of decades – many of which are now incredibly large as marketers [such as Airbnb, Doordash, Uber, Etsy, etc] – have generally been responsible for much of the growth in advertising we have seen, rather than smaller businesses often credited for overall industry trends.”