Olympians get a shot of adrenalin to push them to the finish line. Lucky fire fighters receive the blessing of a cold front to quell an out-of-control wildfire. And marketing-oriented public companies receive a wealth of ad funds to kick-start their new ventures. These dividends are the result of hard work, dedication and, sometimes, the grace of mother nature and good timing. In the case of new public companies, an influx of capital can afford them the luxury of high levels of ad spending to establish their brand. Your clients need to be reminded of these fresh media sales opportunities.
New, publicly traded companies invariably allocate larger shares of their revenue toward advertising than mature companies. This is what Brian Wieser, writing for GroupM, has expressed in his July 10th edition of Weekly Market Trends. Wieser observes that “the first half of 2021 ended with a significant volume of IPOs which were highly relevant to marketers.” The relevance in this case is of great interest to your clients due to the “massive levels of spending on advertising.. Media companies that seek out these aggressive new marketers can take advantage of the abundant ad funds and build lasting relationships.
Awash in cash
The article counts more than a dozen new public companies that recently acquired more than $100 million. Some are well known:, Airbnb, Bumble, Legalzoom and Robinhood. Not all the funds go toward marketing efforts. Many details tend to complicate business plans and expenses for young organizations can be huge. But each of these companies need to establish brand recognition and awareness to become viable. Educating the public about new concepts is expensive. This is where ad funds come into play.
Outsized ratio of ad funds to revenue
This group of new companies averaged 26.8% of ad expenses to revenue last year. On the high end was an allocation of 103% which means that more money went to advertising than was generated in income. The median 2020 ad expense growth of 28.8% generated revenue growth of 30.9%. GroupM aggregates data to show that more mature companies allot a mere 2.4% of advertising expense-to-revenue on average. Consumer packaged goods (CPG), the most ad-intense category, devoted only 15.6% of revenue to advertising and that was the five-year high in fiscal 2016. Mature companies with established brands do not typically devote ad funds far beyond an industry average.
New companies. New opportunities
Your clients can profit by getting in the way of the ad funds thrown around by these fresh spenders. Aggressive, innovative private companies may also be spending at these levels. Some of them may eventually devote smaller shares but their appetite for development and intense competition may dictate otherwise. In a changing, growing economic environment, opportunities are abundant. Help your clients identify these new players with business insight and industry news provided by AdMall and SalesFuel.
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