When I was having on the street developing long-term local direct business, I always knew that "new business" was paramount in my growth. I consistently found that would be great for not only me but for local businesses to build their brand within the community as an important step in helping them to become a major player in their marketplace as well a familiar solution to consumer needs.  Philip Jay LeNoble, PhD. 

COMMENTARY

New Biz Drives Ad Economy, Big Agencies Not So Much

• by Joe Mandese  @mp_joemandese, 8 hours ago

The term “new business” can mean different things on Madison Avenue, depending on who you talk to.

If it’s big agency rainmakers, this year isn’t turning out so great. If it’s one of the biggest agency cloud-watchers, it’s actually one of the most encouraging signs for the ad economy.

Of course, those two perspectives are looking at two different definitions of new business.

In the first case, consultant R3 released data late last week indicating that agency new business has receded dramatically for both media and creative services – in both the U.S. and worldwide – vs. the same period a year ago.

In the second case, it is the formation of new businesses worldwide -- but especially in the U.S. -- that is one of the most “under-appreciated” aspects of the economy that is sustaining ad spending growth, according to GroupM Global President of Business Intelligence Brian Wieser.

“We’ve hypothesized that one of the most important drivers of advertising through the pandemic was this mass expansion of new business formation in the early stages,” Wieser explained during this week’s edition of his team’s “This Week Next Week” podcast.

The episode, which included a guest appearance by the group’s U.K.-based business intelligence analyst Nidhi Shah, revealed stats showing that while new business formation has begun slowing down due to recent economic volatility, it’s nonetheless up vs. pre-pandemic levels, especially in the U.S.

“If I look at U.S., it’s up 45% for the nine months total this year relative to the nine months total in 2019,” Shah explained, adding: “That is remarkable.”

While data for the first half of this year is a little more “muted” for the European Union and the U.K., they are nonetheless up – 2% and 4%, respectively – vs. the first half of 2019.

Wieser noted that the fact that the U.S. has already reported third-quarter data for new business growth and that it’s still expanding despite weakening economic indicators is a particularly important sign.

That said, Wieser noted that new business formation doesn’t impact all parts of the ad economy equally.

Because new businesses tend to have smaller ad budgets that are invested almost entirely in the Big 3 digital platforms – Amazon, Facebook and Google – the growth is not likely to impact big agency holding companies for some time.

And while Wieser didn’t say this part out loud, I inferred that also means the share of U.S. and global ad spending coming from big agencies will continue to decline for the foreseeable future.

“It’s going to be a really important thing for us to keep close tabs on,” Wieser concluded.