B2B advertising has seen increased attention during the last few years, primarily resulting from the growth in digital marketing. Digital media, and specifically search engine marketing, have provided companies that sell products and services to businesses and professionals the opportunity to target their messages and offers to the right audience (usually the decision-maker or buyer) in the right industry (or companies) with a high level of precision.

With the growth in B2B advertising, one segment of the B2B market has been noticeably absent from the discussion: advertising to Hispanic-owned businesses (which I will refer to as simply Hispanic businesses). The topic of Hispanic businesses usually results in more questions than answers:

• Are there really that many Hispanic-owned businesses?
• Are there really that many Hispanic-owned businesses?
• Aren’t most Hispanic businesses small “mom and pop” sole proprietorships like single-location restaurants or dry cleaning businesses?
• Do Hispanic businesses even represent a viable market for my product or service (e.g. we sell CRM software to mid-sized companies)?
• Don’t my existing B2B programs reach Hispanic businesses?
• Even if I wanted to reach Hispanic businesses, aren’t they simply too niche to efficiently target with advertising?
• Do I need to advertise differently to Hispanic businesses?

So should B2B marketers pay more attention to Hispanic businesses? I would argue yes. Let’s start with answers to those common questions, or barriers, about Hispanic businesses.

Are there really that many Hispanic-owned businesses? – There are approximately 2 million Hispanic-owned businesses in the U.S. that generate almost $300 billion in annual gross receipts. By the end of this year, there will be 3.2 million Hispanic firms generating $465 billion (Sources: SBA, HispanicTelligence®). That number is expected to balloon to 4.3 million by 2012. In fact, as of 2007, 1 out of every 10 small businesses in the U.S. is Hispanic-owned (Hispanic Trends).

Aren’t most Hispanic business small “mom and pop” sole proprietorships – More than 50% of Hispanic businesses have 25 or more employees (U.S. Census Survey of Business Owners, 2002).

Do Hispanic businesses even represent a viable market for my product / service? – Hispanic businesses are in a variety of industries and range from the start-ups to large public companies, and therefore consume every imaginable business product or service. However, Hispanic businesses are concentrated in the following industries:

Don’t my existing B2B programs reach Hispanic businesses? – The short answer is yes. The successful Hispanic is bilingual (> 75% of Hispanic business owners / decision makers speak excellent English), and existing general market B2B advertising programs no doubt reach them. The question is do they effectively impact and engage them in meaningful way. I would argue no, and as there is an opportunity to tap into the unique experiences, challenges, perspectives and attitudes of Hispanic businesses with advertising built around unique Hispanic business insights. To put it another way, 44% of Hispanic businesses are owned by individuals of Mexican origin – do you think their experience as a business owner is different from their Anglo counterparts?

Aren’t Hispanic businesses simply too niche to efficiently target with advertising? – There has historically been a very real issue around the lack of viable traditional paid media properties that reach a mass audience of Hispanic businesses. I would argue that there are only 1 or 2 viable traditional publications that effectively reach large numbers of Hispanic businesses (Hispanic Business and Poder/Hispanic). However, digital media, including search engines, display media, performance and behavior platforms and social media have created new ways to effectively reach Hispanic Businesses.

Do I need to advertise differently to Hispanic businesses? – As I mentioned earlier, Hispanic businesses can be reached with general market B2B advertising, but not addressing the unique experiences, perspectives, attitudes, and challenges of decision-makers at these companies is really missing out on an opportunity to engage them in a meaningful way. The last question really gets at the heart of the untapped opportunity to market to Hispanic businesses.

To illustrate this, I’ve put together the following Hispanic business pyramid:

There is generally a direct correlation between the size of a Hispanic-business, who runs them, what their immigrant status, and what their acculturation level is.
So what is a B2B marketer to do? I would suggest the following approach:

1. Do some market research and try to figure out whether Hispanic businesses represent 10% or more of your market? (Some simple Census data will do the trick, especially with the “2010 Census Survey of Business Owners – Hispanic Business Owners” coming out in September). If yes, move on to step 2.
2. Figure out what segment of the Hispanic business pyramid you are targeting
3. Delve deeper into your segment and identify key insights among those Hispanic business decision-makers vis-à-vis your products/services
4. Consider customizing your products / services to address the Hispanic insights you have identified
5. Launch digitally driven, integrated advertising programs that allow you to cost-effectively reach and engage Hispanic businesses.

Unfortunately, most companies that have attempted to enter the Hispanic business market (banks, insurance/benefit providers, software companies, etc.) have done little else than simple extensions of their general B2B marketing in the form of sponsorships of local Hispanic chambers/professional/trade organizations and B2B networking events. I’ve seen firsthand the benefits and first-mover advantage reaped by health insurance providers and banks that have followed this approach and truly invested in the Hispanic business market.

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.

First, some data to understand the market:
– Hispanic Business magazine’s HispanTelligence estimates there are 2.2 million Hispanic-owned businesses generating close to $388.7 billion in revenues this year.
– This has been a rapidly growing market, with a CAGR of 9.1% over the last 5 years (Source: HispanTelligence)
– Over the next 7 years, Hispanic-owned businesses will be the fastest-growing component of the business market in the U.S., and their rate of growth is projected to be almost three times that of overall U.S. firms (Source: Latino-Business Barometer United States, 2005, RDA Global).
– By 2010, there are expected to be 3.2 million Hispanic firms generating $465 billion in revenues (Source: U.S. Small Business Administration, HispanicTelligence)

Furthermore, research indicates that among minority groups Hispanics are the most likely to start their own business (Source: SMOBE, SBO, U.S. Census).

Aside from all of the aforementioned positive projections that were made before the recent slowdown in the economy, the Hispanic business market has some intrinsic fundamentals favoring a positive outlook, even in a contracting economy, including the following:
– Many Hispanic businesses cater to the Hispanic consumer market, which is growing (see my previous post) and will weather the current slow-down relatively well
– While many Hispanic Business are in industries that are being hit hard by the slowdown (retail, construction), many are in growth industries – including health care, accommodation and food services, professional services, and admin and support services
– The growth and increased emphasis on supplier diversity (find out more about supplier diversity) by large U.S. corporations in all industries and the government sector will insulate many Hispanic businesses from reduced budgets and contracting opportunities
– Most importantly, a continued growth in the population, an increasing number of 2nd generation Hispanics, coupled with an overall trend towards starting new businesses, will keep positive pressure on the number of new Hispanic-owned companies started, even in a slower economy.

I am very bullish about this segment of the U.S. economy during the next 2 years. Entrepreneurs and the small businesses they start and run are the most nimble, flexible and adaptive areas of our economy – they adjust the best to changing market conditions – and this holds true for their Hispanic brethren. The Hispanic population is exploding, and a direct by-product of this population growth is a rapid growth in the Hispanic business community, comprised of new and established Hispanic-owned businesses.

Hispanic consumer spending

The Hispanic consumer market represents the collective buying power of 45.5 million people, or roughly 15.1% of the entire U.S. population (Source: U.S. Census, 2008). Most people who follow the Hispanic market will tell you that the 45.5 million figure is conservative, and fails to capture the 12-20 million undocumented Hispanics in the U.S. Bottomline, this is a big chunk of this U.S. consumer market.

There have been a lot of stories pointing to the fact that the Hispanic market has been hit harder than the general market by the sub-prime housing situation, evidenced by the massive foreclosures and strong drop in home values in western states like California and Nevada and the real estate free-fall in South Florida, which all represent significant Hispanic population centers. Add to this trend the fact that a lot of housing-related industries, such as construction, which employ a lot of low-skilled labor, have been particularly hard hit. There are even some reports that immigration from Latin America has slowed in the last year.

However, on the brightside, there is a historical trend for the Hispanic market to fair better in recessions than the general market. During the last recession (2001-2003), the Hispanic market was generally felt to have faired well. Hispanic households also historically show lower unemployment rates during recessions. Hispanic households are also larger, on average, and younger (1/3 of the Hispanic population is under 18). This means more kids and teens, segments that drive spending under all economic conditions. Another trend that we’re seeing is a dispersing of the Hispanic population from traditional population centers in the Southwest to other parts of the country, as construction jobs in these area have dried up, recent immigrants have moved to other parts of the country, including the South and the Midwest. Add to this the fact that even with a reduction in immigration flow, the Pew Hispanic center is still estimating 225,000 new immigrants from Mexico and Central America this year alone.

All in all, while the sinking housing market and housing-related jobs market will put negative pressures on Hispanic spending, it will be more than outweighed by fundamentals such as continued immigration, population dispersion, and younger/larger households. My view is that Hispanic consumer spending will remain relatively stable and continue to grow, albeit more slowly, even as the rest of the country sees consumer spending dip in 2008 and 2009.

I’ll continue this analysis on Wednesday with a look at the Hispanic advertising industry, and conclude the analysis on Friday with a look at the Hispanic small business market (Hispanic-owned companies).

It also discusses how some of the “ad networks” created by traditional media companies are pretty much just a collection of a few sites that will have a hard time competing with the large collections of inventory and data that the ad networks possess.

Also last week, it was announced that Apple passed Wal-Mart in music sales to become the biggest US music retailer. This despite the fact that the labels have done everything they can to break Apple’s stranglehold on online music sales and explosive growth, including teaming with Wal-Mart to launch a rival online music store.

To paraphrase what a venture capitalist friend of mine said on a panel last Friday, innovation rarely takes place in big companies. Despite the wealth of capital they possess, they just don’t have the creativity.

The article does a decent job of talking about the attractiveness of the Hispanic market overall and the Hispanic ad market in particular.

The story includes this quote by Gallegos on why anyone would advertise to the low-income Hispanic demographic, which makes the case for the Hispanic market as well as any I’ve heard:

“You ask: the guy who just came across the border with a coyote, do I want to go after him, too? Well, he’s going to get a job. He’s going to work. He’s going to start buying products and contributing to the economy. So while he might not be viable for a Mercedes today, I can introduce you to people who came here illegally or legally, with nothing, and are now driving a Mercedes. Advertising is aspirational. I want to aim ahead of where my audience is. Unless it’s the equivalent of beef to Hindus, I always say, any product and any service should be sold to Latinos in this country.”

He’s right. Although not all Hispanics drive new cars and buy Playstations right now, one of the reasons that many Hispanics immigrate to the US is because it gives them the opportunity to aspire to those things.

There’s a funny part later in the article where, although the article is ostensibly about how the Hispanic market is maturing and Hispanics are a growing sector of the US economy, the NYTimes reporter still feels the need to phonetically spell out how to say “Gallegos.” Pretty funny.

The end of the article is by far the strongest part. The reporter asks whether bilingualism and biculturalism in the Hispanic market will disappear the way it has in other American cultures and subcultures. The example she uses is that of Yiddish print ads from the early 20th century that were in both English and Yiddish, similar to a lot of the Spanglish ads you see today. As Hispanics become a larger and more mainstream part of the US economy and culture, will the Spanish language come with them into the mainstream? Will Spanish-speaking Hispanics become the norm in the US and spread to the rest of the country, or will today’s Hispanic children and their children after them embrace English and leave their Spanish roots behind them? What then of Hispanic advertising? The same fate as Yiddish ads for Woodbury’s Hair Tonic?

Today, I got the chance to do that all over again – sort of. Today I launched Sensis - a new name and identity for the interactive agency I have been running for the last 8 years (Focus Multimedia). I know – it’s not the same, but it sure feels similar. The launch revolves around a new Web site – sensisagency.com - and an exciting new brand our agency has been working on for almost 6 months.

Man, this feeling is intoxicating. There is nothing quite like it.

First, the satisfaction after having worked so hard for so long. We first decided to change our name back in April. Since then, we have gone through an exhaustive series of steps, starting with selecting a name, then a logo, and a business system. Then came the Web site – the creative concepts, the site maps, the mockups, the copy plan. Then the thousands of little things – ranging from our new emails to changing the caller ID on our phones!

Then there is the anticipation factor. What will people think about the new name, the new logo, the new Web site? Will the Web site track a lot of page views. How many people will check out the blogs (and this read this blog?) How many people will read the Press Release?

Lastly, the excitement about the future. A launch signals the beginning of a journey. In our case a new beginning. What will the agency look like a year from today? The client list? The employees? So much to look forward to…

Don’t get me wrong – when we launch a big campaign for a client or a major Web site redesign, it’s extremely exciting and fulfulling. But it’s different. The emotions are stronger. It’s just a more intense experience.

It’s also nice to have a few years of experience under my belt this time around. I may not know much, but I know a lot more than I did back in 1999.

Most importantly, it’s nice to know that I haven’t lost the optimistic enthusiasm of a naive entrepreneur. I need to do this more often…