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8/3/2019 Small Business Banner Ads Blog Post
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How much banner ad spend is in the long tail of
small business advertisers?
By Myles Younger, co-founder of Canned Banners (www.cannedbanners.com)
My company serves businesses that cant afford or dont have a need for custom banner ad
creative. This puts me in a very specific segment of the online display ad market: low-budget
banner advertisers (banners being distinct from other online display formats such as video,
mobile, etc).
Ive always been curious: exactly how many low-budget banner advertisers are there? How
much money do they spend? How much of the overall banner ad market do they represent?
Being unwilling to shell out $800 for a bunch of hot air from a market research firm, I took a stab
at estimating how much banner ad spend is in the long tail of small business advertisers.
What I found was a $1.1 billion market spread across 5.8 million small businesses. Whereas at
the high end of the market, a small minority of firms spend vast sums, the long tail is the
extreme inverse, encompassing a sea of small firms with modest budgets and entirely different
needs.Separating the long tail from the big guys
To keep the problem manageable, Ill split all banner advertisers into two groups based on how
much they spend. The first group encompasses the large- and medium-sized advertisers that
are able to afford complex and professionally-managed banner ad campaigns.
The second group will be our long tail market. There are literally millions of small businesses in
this group, but each firm by itself does not have very much to spend. These advertisers are only
able to invest in banner advertising if its simple and affordable.
Reaching an estimateA few points to note: this analysis is just one method of estimating the size of the long tail
marketI dont claim that its completely airtight; my data is limited to the US market; Im only
focusing on banner advertising; the complete data tables are available at
blog.cannedbanners.com.
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Now lets attack the problem in five smaller chunks:
1. How many companies exist in the US? About 6.2 million* (I used 2004-2007 data from
the US Economic Census to make an educated guess for 2010).
* Excluding 20+ million firms with no payroll. These firms add noise to the data in various ways. First, we
cant determine the size of firms with no payroll. Second, a single organization can have multiple taxable
entities, thus distorting per-company estimates. Third, these firms account foronly 3.2% of total US firm
revenue.
2. Can companies be categorized by size? Yes! US Economic Census data provides the
distribution of firms and revenue according to number of employees. I used 2004-2007
data to extrapolate how many firms are currently in each size group.
3. How big is the total banner ad market? 2010 estimates seem to fall just under $6
billion. Ill use a $5.73 billion estimate from a July 2010 Piper Jaffray report.
4. How is the banner ad market distributed across company size groups? I had to find a
proxy to help estimate this. Revenue distribution across company size groups should
correlate strongly to the distribution of ad spending (IRS data supports this assumption*).
The next chart allocates the $5.73 billion banner ad market in proportion to the revenue
earned by each company size group.
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*The ratio of advertising expenses across US corporate tax returns is about 1% of receipts; corporations
with revenues exceeding $1 million spend about 1% and corporations with less than $1 million in revenues
spend about 1.3% (i.e., there isnt a huge variance in spending ratios across company sizes).
5. Whats the criteria for separating low-budget and big-budget advertisers? Its
difficult to answer this objectively, so Ill just be subjective. A big-budget advertiser can
afford lots of campaign-related services (custom creative, ad verifiers, etc) and still have
plenty of money left over for media buying. A firm in the long tail market, on the other
hand, has so little money to spend that unless campaign-related services are kept to a
bare minimum, the firm will have no money left over for media buying.
Making this differentiation requires calculating average banner ad spend at a company
level, as shown in the next chart.
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Companies with budgets of $73, $202, and $406 per year all clearly qualify for inclusion
in the long tail market (especially compared to large companies spending $188,027 a
year!).
Its debatable whether companies in the 20-99 employee group, with banner ad budgets
of $1,336, belong in the long tail market. Ill split this group 50/50 so that half its spend
($365 million) counts toward the long tail market.
All the companies with 100 or more employees will sit squarely in the big-budget
category.
Now that we know which companies are small enough to qualify for the long tail market,
we just need to add up their combined spend to find the long tail markets total size.
How big is the long tail market?
Currently, $1.13 billion (19.7%) of banner ad spend is in the long tail market. This $1.13 billion is
spread across 5.8 million firms, so each firm spends, on average, a mere $194 per year (versusnearly $12,000 for big-budget firms).
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Conclusions
At $1.13 billion in banner ad spend, the long tail market is more than large enough to justify its
own specialized services and technologies. However, the 5.8 million businesses in this segment
each have an average banner ad budget of only $194 per year. New technologies that automate
and simplify banner advertising for small businesses will be integral to unlocking economies of
scale and, most importantly, profits.
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