The 2000 Census was particularly impactful, with tons of media attention from the cover of Time magazine to lead stories throughout most of the American media. In fact, since the 2000 Census figures ushered in this new level of attention to the Hispanic market, there have been at least:
• 45 new Hispanic ad agencies launched
• 38 new Spanish-language newspapers put into circulation
• 1,250 new Spanish-language and Hispanic-targeted television networks on air
• 100+ new Hispanic-targeted Websites

Most importantly, there was a significant expansion in resources dedicated to the Hispanic market by Corporate America, primarily in the form new marketing hires, new departments and groups focused on the Hispanic market, numerous acquisitions, and countless new product launches.

Naturally, there was a lot of excitement and anticipation in our industry leading towards the unveiling of the 2010 Census results. I think it’s fair to say that most in our industry were expecting the 2010 Hispanic population data to spur at least as much new activity as the 2000 and 1990 Census results did. Many, I would argue, expected even more attention and business activity to have been spurred by the 2010 Census in the year following the unveiling of the results.

Well, it’s been almost 6 months since the 2010 Census results were released, and everyone now knows the Hispanic market has topped 50 million.

And tell me if I’m wrong, but there really hasn’t been that big of a boom in the Hispanic market?

Talking to industry colleagues in the last few months, they corroborate my theory. No Time magazine cover stories. No new Hispanic agency reviews by companies that have yet to jump into the Hispanic market. There have been very few, if any, new Hispanic ad agencies or Hispanic media companies?

A lot of this lack of activity can surely be attributed to the ongoing economic issues facing the country and the fact that a lot of companies are hesitate to invest in new markets and programs.

But I think there is more going on here than just the economy. Here are my theories, in order of magnitude of impact:

1. Most of the low hanging fruit has been picked – Most major marketers in the U.S. are already involved at some level in Hispanic advertising. There really weren’t that many companies left on the sidelines as of April 2011.

2. The Census numbers revealed two Hispanic markets – According to the latest Census figures, a whopping 63% of U.S. Hispanics were born in the U.S. That one statistic has underlined a profound debate in the industry about whether Hispanics, particularly English-speaking more acculturated Hispanics, are still a distinct segment, with distinct media consumption habits that Hispanic-specific marketing programs should or even could effectively reach.

3. The power of expectations – One can argue that 2010 was the first Census when everyone had big expectations regarding the growth of the Hispanic population. I think a lot of people were expecting big numbers, north of 50 million. Bottom line, no one was surprised by the eventual figure, and so it did not lead to new activity, since everyone had already planned for it. Put another way, the effects of the anticipated Census results were already baked into most company’s plans.

4. The trend towards general market consolidation is impacting the industry – Anyone who has ever read my past blogs knows that there has been an undeniable trend towards marketers consolidating their Hispanic marketing and advertising programs with general market agencies. That, in my opinion, has reduced the prominence, role and budgets of many Hispanic marketing initiatives.

5. More Hispanics doesn’t mean more spending – As the economy has struggled, minority groups like Hispanics and African-Americans have borne a bigger negative impact, as revealed by the unemployment figures in the Hispanic market, which are much higher than the overall national averages. So although the population has increased, many marketers are seeing a Hispanic consumer with less disposable income, and therefore a potentially less attractive market than in past years.

Have the 2010 Census figures been as big of a let-down for you as well? Is it too early to call? I’d love to hear your thoughts…

(an edited version of this article originally ran on MediaPost’s Engage Hispanic blog on 9/1/2011)

I know everybody and their mother is putting out their analysis of the U.S. Census figures these days, particularly as they relate to the Hispanic population. However this article is definitely worth your time, as it tackles some pretty big issues and implications, both in the near-term and in the future (a few generations out).

In full disclosure, I was interviewed for the article (my take on the implications for business and marketing is included) and Wharton is my alma mater.

Futurecasting is a heuristic technique that helps envision future consumers, products, industries, competitors, challenges, or opportunities; by combining forecasting and imagination to model future states. Web Personas are commonly “futurecasted” by digital agencies to help plan out long-term digital investments – such as large-scale Websites with enterprise functionality (e.g. e-commerce, personalization, etc.) – so they are adaptable to changing user behavior and motivations. Futurecasting is a flexible business modeling tool and can be applied in various ways. I have found that Futurecasting can be particularly useful when “disruptors” are factored in – exogenous shocks or changes that cause a significant change in trend lines. A classic example is World War II and the resulting “baby boom,” a disruptor that changed U.S. demographics for 50 years when thousands of GIs returned home and started having larger families.

One of the most dynamic segments of U.S. society and business is the U.S. Hispanic market. The last 10 years in particular have seen significant growth, driven by a rapidly growing population and its effects on American culture and business. An interesting question that I think about a lot is how the U.S. Hispanic market will look in the future… in 2, 5 and 10 years for example? One way to think through this question is to futurecast the U.S. Hispanic market.

The first step in futurecasting is to start with basics trend lines and see where things are heading. Let’s look at the Hispanic market across four broad trend lines: Population, Acculturation, Media Consumption, and Technology usage.

Population – The 2010 Census figures coming out in a few months will not doubt show a continued upward trend in Hispanic population. The only question is how close the final Hispanic population figure will get to 50 million (up from 35 million in 2000 and 45.5 million in 2009). We also know that Hispanics have spread out from traditional gateway states in the Southwest into the Midwest and South in increasing numbers. I expect those population dispersion trends to continue, and potentially accelerate, with states like California, Nevada and Arizona still reeling economically from the current recession. We also know that Hispanics are getting younger – currently 50% of all U.S. Hispanic are under 26. In fact, the largest age cohort among Hispanics is ages 2-11 (making up 21% of the population). There is no reason to think that Hispanic birthrates will slow down, particularly with a growing population base. So we can assume more Hispanics that are younger, and spreading out living in other parts of the country.

Acculturation – The Hispanic market has generally been viewed thru the prism of the 3-part acculturation model (acculturated, partially acculturated and unacculturated). Currently, roughly 50% of the market falls into unacculturated, 30% are acculturated, and 20% are partially acculturated. Moving forward, with such a large and young U.S.-born Hispanic population, trends point to a redistribution towards partially acculturated and acculturated. Looking into the future we can assume more acculturated and partially acculturated Hispanics, both in absolute terms and as a percentage of the population.

Media Consumption – Hispanic media consumption has begun to change with the overall growth and increased adoption of digital media, albeit slower than in the general market. One result of this gap (in 2009 only 58% of Hispanics had access to the Internet vs. 71% of those in the general market), is that there will be a “catch-up” effect, particularly as the price of electronics and broadband access continues to drop. Looking towards the future, we should see a dramatic shift in Hispanic media consumption – either by increasing the overall time they spend with media (by adding digital media) or as a shift away from traditional media.

Technology Usage – Acculturated and partially acculturated online Hispanics already show a strong propensity to be early adopters of new technology. However, as AOL’s 2010 Hispanic Cyberstudy discovered, less acculturated Hispanics are actually more likely to be early adopters of new technology. Looking into the future, there is no reason to expect that behavior to change, particularly with falling technology prices.

Put these trend-lines together and we start getting a pretty interesting picture of Hispanics in the next 2-10 years:
• A younger population, that is more acculturated
• A geographically diverse market – that is quickly growing in the South and Midwest
• A group of consumers that is spending more and more time consuming digital media (in many cases for the first time)
• And a consumer base that is pushing the technological envelope, leading the adoption of new devices such as tablets, 4G smartphones, and emerging gaming platforms.

But things get really interesting when we start looking for potential disruptors and the resulting shifts and opportunities. Here are a few for you to ponder:

Retro-acculturation – The retro-acculturation trend within the Hispanic market is nothing new – 2nd and 3rd generation Hispanics actively reconnecting with their Hispanic heritage and culture by learning Spanish, listening to Latin music, and looking for authentic “Latin” experiences. Just look at the growing cottage industry of Spanish-language children’s books to get a sense of what’s happening. Now consider a huge US-born “Hispanic” millennial population that is starting to have their own children. I can see retro-acculturation splintering that nice and clean 3-part acculturation model. I could imagine at least one additional segment appearing (“retroacculturated”) – maybe more. This disruptor could also have a profound impact on what kind brand experiences these future Hispanics look for. A desire for Latino authenticity seems like a natural next step, which could threaten some established “cross-over” brands that are no longer viewed as real (think of popular Mexican food chains or shelf-brand salsas).

Changing Diets – If you don’t think American’s are changing what they eat, just visit your local McDonald’s – greasy egg sandwiches are giving way to granola and fresh fruit. As Americans as a whole become increasingly health conscious, the trend will likely reach all segments of the Hispanic population. What happens when those high fructrose corn syrup filled tortillas and preservative –filled canned frijoles don’t cut it for Hispanic consumers? Hispanics may not start flocking to Whole Foods tomorrow, but there might very well be a need for something in between that and the discount Hispanic grocery chains that dominate the market today.

Mixing of new cultures – What happens when Mexicans and other Hispanic groups start settling in places in like Tennessee, Ohio, Alabama, and Georgia? I think that the potential changes would be more significant than the appearance of new Spanish language media in those markets (especially over 5-10 yearsCan you imagine the inevitable fusion that results when guisados meets soul food? Imagine country and Spanish boleros forming new genres – it’s actually already starting to happen. How long before soccer becomes a popular sport outside of the Southwest and East Coast? Lots of new products, genres, and demand for products and entertainment that probably don’t exist today.

A “Hispanic Baby-Boom” – Finally, there is a potential “baby” baby-boom coming from within the Hispanic market that could have a profound effect on the Hispanic and overall U.S. population. With close to 20 million Hispanics at or entering child-bearing age over the next 10 years, the potential for a new baby boom is real. The resulting demographic shifts could reverberate across U.S. culture and commerce for the next 50 years.

Regardless of whether some or all of these disruptors come to pass, futurecasting paints a clear picture of a fundamentally different Hispanic market than the one we know today.

Think about this way – no one will argue that the Hispanic consumer isn’t important (there are $6 billion reasons why they are important, ask Univision and Telemundo)

However, is it me, or is there a “Blue Ocean” strategy staring Hispanic marketers in the face?

If you haven’t read Kim and Mauborgne’s popular book “Blue Ocean Strategy,” they posit that tomorrow’s leading companies will succeed not by battling competitors head-on in bloody battles that result in “red ocean” of shrinking profits, but by instead creating “blue oceans” of uncontested market space ripe for growth.

Looking back at the 2009 Hispanic media figures presented in the 2010 Hispanic Fact Pack, $4.3 billion was spent on Hispanic TV (network, spot and cable), representing almost 70% of all media spent reaching Hispanics. That sure looks like a “bloody ‘red ocean’” if I’ve ever seen one.

I understand why TV still gets the lions share of media spend – they pull huge viewership numbers. But TV doesn’t command 70% of Hispanic consumer media consumption. In fact, according to a 2008 Terra/ComScore report, the average Hispanic 12 years or older spent more time online than watching television. This disequilibrium of media demand is also likely driving Hispanic TV media prices (CPMs) higher than they should be.

So it would seem to me that a clear “Blue Ocean” opportunity exists for savvy Hispanic marketers that don’t want to fight in the crowded and “bloody” medium of Hispanic TV.

Instead, they could invest heavily targeting Hispanics online. Imagine a Hispanic marketer investing 50% of their Hispanic ad dollars online? They wouldn’t have much competition, and it’s clear Hispanics are spending as much time there as on TV… who’s ready to sail?

That’s a big question, and one at the heart of the future of the entire Hispanic marketing (which includes media, public relations, publishing, etc) industry.

My answer was simply that I felt that this trend was temporary. Companies like Home Depot might be compelled to consolidate agencies in the short-run, primarily as a cost-savings move. However, as the economy improves, companies will re-evaluate if consolidation of Hispanic and general market advertising is providing them the best ROI.

In many ways, this question goes to the heart of how the Hispanic market is viewed by most marketers. It’s viewed as an important, but secondary, market. Almost, dare I say, a luxury. And the marginal additional cost of hiring a Hispanic-specialty ad agency is therefore a luxury expense that companies will not spend during recessions.

The next few years will determine if my thesis is correct. In fact, the Home Depot might provide the best test. Who wants to bet they begin a Hispanic agency review sometime between April 2011 and the end of 2012?

I began thinking about the Hispanic digital media industry as a whole, and I started to realize what a funk it’s in. Think about it – when was the last time a major player entered the Hispanic digital market? What was the last major move by a media company into the Hispanic digital space? Long gone are the heady days of 2005-2007, where new players were constantly entering the market, competing with established media companies like Univision, Terra, and Starmedia to push the innovation envelope.

Obviously, the recession has played a big part in this. Most media companies, and the investors that roll the dice in this sector, got hammered in late 2008 and 2009. I’m sure a lot of interesting projects and new ventures were shelved because of the recession.

This worries me as a professional who evangelizes the power of digital Hispanic marketing. I hope entrepreneurs who know and love the Hispanic market take advantage of this lack of competition to build new lucrative businesses, and hopefully bring back the innovation that has been missing the last 24 months.

One of the principle reasons I decided to enter the world of Hispanic advertising was to bring a more rigorous and data-driven analytical approach to what I viewed as the unsophisticated and heuristic nature of some of the most important decisions made in our industry. While our industry has come a long way, including the omnipresence of account planning and the growing and rich field of Hispanic direct response, there is still one very important process that has managed to move forward, year after year, according to the same simplistic approach: the allocation of Hispanic marketing budgets.

As anyone who has ever worked at an agency or media/publisher will tell you, overall marketing budgets typically come down from the “heavens” (i.e. the C-suite) with little input from outside marketing professionals. However, how those overall marketing budgets are allocated across markets, products/services, and marketing mix elements is typically a joint exercise between the client, their agencies, with some occasional input from select third parties such as consultants, media and publisher partners.

Yet, more often than not, the decision as to how much to invest in Hispanic advertising is made heuristically or worst yet, simply handed down as the “scraps” of what is left after general market and other lead agencies lay their claims. As the AHAA (Association of Hispanic Advertising Agencies) Right Spend report has been chronicling for years, advertisers have failed to allocate the minimum recommendation of 8% (based on Hispanic population and buying power alone) of their advertising budgets to the Hispanic market. While each industry and company will ultimately invest varying allocations to the Hispanic market based on their particularly situation, the aggregate 8% AHAA benchmark indicates that on average companies are under-investing in the Hispanic market.

So how much of an advertiser’s marketing budget should be allocated to the Hispanic market? The more relevant question is how should companies, together with their agencies partners, approach the question of budget allocation? A decision as important as how much to invest in the fastest growing minority group should be based on more than “rules of thumb” or an after-thought exercise of pooling left-over resources. I suggest that budget allocation models should be used, and that marketers gradually use more sophisticated approaches based on increasing availability of data.

As I’ve alluded to so far, most companies use simple heuristics, or rules of thumb, such as allocating marketing budgets based on some arbitrary percentage (e.g. 5% of total marketing resources) or a bottoms-up decision rules approach (e.g. determining desired awareness or reach /frequency levels, and then backwards calculating required marketing spend). Instead, I recommend using the two-part marketing allocation approach described by Harvard Business School’s Gupta and Steenburgh “Allocating Marketing Resources” (2008) paper that initially models demand and then uses those estimates as an input into an optimization model to determine appropriate allocations across the marketing mix. Without getting too academic, Gupta & Steenburgh suggest modeling the demand that will be created, or how much additional Hispanic consumer sales will be generated by an increase in Hispanic marketing resources (i.e.demand elasticity.) There are three ways to model this Hispanic demand:
1. Option 1 – Statistical Models: when historical figures for Hispanic market sales and marketing expenditures are available, the impact of Hispanic marketing activity on sales can be modeled using a demand function. This is the best option, available to companies with recent experience marketing to Hispanics
2. Option 2 – Experiments: When there is a lack of reliable, recent data on Hispanic market sales/marketing activity, companies can undertake experiments to gauge Hispanic consumer response to new marketing activities. This incremental approach allows companies to use small test initiatives to model out expected results from larger-scale initiatives.
3. Option 3 – Expert Judgment: When past data is not available and experiments are not feasible, companies should use the managerial judgment and experience of their Hispanic agencies to forecast Hispanic sales

While the data-based approaches of Options 1 & 2 provide the most accurate models of Hispanic demand, use of any of the 3 approaches will provide companies with an excellent starting point to model Hispanic demand, and therefore determine proper Hispanic marketing budgets. As opposed to taking a passive approach to Hispanic marketing, these models provide companies the basis for a proactive approach to the Hispanic market based on the bottom-line return on investment they will reap from their marketing investments. The next step is to optimize a Hispanic marketing budget among the growing marketing mix of elements ranging from promotions, to direct response, to branding and across vehicles such as TV, digital, radio and out-of-home (a topic for another day!)

In many ways, the 2000 Census ushered in an unprecedented golden age of Hispanic advertising and media that we’re still enjoying in 2009 (in light of the difficult economy).

As we prepare for the Census count next year, I keep thinking that the results, which should begin to trickle out in early 2011 (less than 18 months from now), will be a Catch-22 for our industry.

One of two things will happen – either the 2010 Hispanic population numbers will exceed or fall short of expectations. In some ways, both spell trouble for Hispanic advertising.

Obviously, if the Hispanic population numbers fall short of expectations, there will be inevitable talk that the Hispanic market has peaked and that recessionary economic pressures and impending immigration policy changes will mark the end of the “golden years” of Hispanic population growth. This is the kind of worst case scenario that is very similar to the disastrous effect of higher than “expected” inflation (sorry, I digress to my macroeconomics background). This will inevitably lead to marketers reassessing their Hispanic advertising budgets and potentially flat lining them or worse.

If the Hispanic population numbers exceed expectations, the common theory goes that it will serve as further fuel for the fast burning fire that has been growth in Hispanic advertising and media. While no doubt a boost for the Hispanic media business (broadcast, radio, Internet, mobile, print), I question if it is not a mixed blessing for Hispanic advertising agencies.

If the Hispanic population numbers do exceed expectations, what do you think general market agencies will do? I can’t imagine they will sit idly and watch their budgets get reallocated to their Hispanic counterparts. That is not what they’ve done the last 5-10 years. I have to believe big Hispanic population Census results will only reinforce the importance of their efforts to take on Hispanic agencies. It would be a matter of survival.

What do you think?

According to the Pew Hispanic Center’s “Unemployment Rises Sharply Among Latino Immigrants in 2008,” Hispanics have actually maintained a higher rate of employment than the overall population (62.3% vs 61.6%, respectively) The report also shows that Hispanics have the highest labor force participation rate of any group measured at 68.3%.

While not good news, it shows that this is a labor market that more quickly adapts to difficult economic circumstances, especially when you consider how key Hispanic employers in construction, hospitality, and the retail sector have been hit by the recession.

You can read the piece by clicking here.