Month: March 2009

small-business advertising is big

With the ongoing destruction of traditional Yellow Pages advertising and newspapers’ death spiral, small businesses need new advertising channels.  U.S. businesses with less than $1 million business receipts  had in 2005 total business receipts of about $2 trillion and total advertising expenditure of about $27 billion. Meeting the advertising needs of small businesses is a big deal.

The transactional problems of small-business advertising are quite difficult. Businesses with less than $1 million in business receipts have a yearly payroll that on average is roughly equivalent to one employee working for two months out of the year.  Their average advertising expenses across the 28.5 million businesses of this size is about $1,000 per year.  Even for a business with $1 million in business receipts, advertising expenditure is likely to be only about $12,000 per year.  Historically, small businesses have purchased simple, standard-sized, standard-format, usually black-and-white print advertisements in local print media, year after year in the same way.  Like traditional print advertising, online advertising for small businesses needs to be simple, low-cost, and not time consuming for the persons placing the advertisements.  Advertising services for small business must be economically viable at low-value, high-volume transactions.

Small business are important sources of business opportunities, employment, and innovation. Developing online, small-business advertising services is a large-dollar opportunity.  It’s also vital for the overall health of the economy.

Data note:

The U.S. Internal Revenue Service (IRS) makes publicly available a large amount of data aggregated from tax returns.   Three cheers for the IRS!  Corporations and nonfarm sole proprietorships itemize advertising expenses on tax returns.  Partnerships do not. Nonetheless, the IRS makes publicly available sufficient data to estimate reasonably total advertising expenses for all businesses (corporations, nonfarm sole proprietorships, and partnerships).  Here’s a spreadsheet containing small-business advertising expenses from IRS tax returns.  Data points:

  1. Corporations with less than $1 million in business receipts and all nonfarm sole proprietorships have similar advertising expenses to business receipts percentages by industrial sector and similar distributions  of business receipts across industrial sectors.
  2. Sectors with relatively high small business advertising expenses relative to business receipts are educational services, information, and real estate, rental, and leasing.
  3. Advertising as a percent of business receipts generally decreases with increasing corporate size.
  4. Small-business partnerships account for only 6% of partnership business receipts, based on 2003 data.
  5. Among small business (meaning here businesses with less than $1 million in business receipts), corporations, sole proprietorships, and partnerships account for about 48%, 42%, and 9% of the total $26.9 billion estimated small-business advertising expenses.

I’d write more, but I’ve got to get my tax return done.

new-media advertising

While new media tends to be associated with delusions of an effortless, viral-promotional road to success, small, information-sector firms in the U.S. on average have relatively high advertising expenses. In 2005,  small corporations (corporations with business receipts under $1 million) and nonfarm sole proprietorships had advertising expenses amounting to 1.4% and 1.2% of business receipts, respectively.  In the information sector, the corresponding figures for small corporations and sole proprietorships were 1.9% and 3.8%.  Sole proprietorships, which are likely to be younger and more innovative than small corporations, had much higher advertising expenses.

Small, new-media businesses have much higher advertising expenses than small, traditional information businesses.  Among sole proprietorships, the information-sector subcategory “Internet publishing and broadcasting” had advertising expenses amounting to 10.0% of business receipts.  That contrasts sharply with advertising expenses of 1.1% of business receipts for “Broadcasting (except internet) and telecommunications”.

Data note: Based on 2005 IRS data on advertising expenditure reported on business tax returns.

COB-33: bureaucratic recordkeeping

recordkeeping

Recordkeeping is a core bureaucratic function. A recent scientific article, while cowardly eschewing the term bureaucracy, described these findings from economic experiments investigating recordkeeping:

Recordkeeping improves memory of past interactions in a complex exchange environment, which promotes reputation formation and decision coordination. Economies with recordkeeping exhibit a beneficially altered economic history where the risks of exchanging with strangers are substantially lessened.[1]

Bureaucrats engaged in recordkeeping develop reputations, coordinate decisions, and reduce risks. Can anyone doubt that bureaucrats beneficially altered economic history?

Ancient Mesopotamian civilization also demonstrates the importance of bureaucratic recordkeeping.  Writing in ancient Mesopotamia arose from accounting, a particular type of recordkeeping.  Even more noteworthy is that the most frequently copied record in ancient Mesopotamia was a list of titles and professions, arranged in a status hierarchy.  The king topped the list, followed by “leader of justice,” “leader of the city,” “leader of the plow,” “leader of barley,” etc.  This pioneering org chart was continuously copied in ancient Mesopotamia from 5000 to 4000 years ago.  With 165 copies existing just in the corpus of surviving records from Uruk from about 5000 years ago, the org chart undoubtedly is a record of great importance.[2] Not just recordkeeping, but bureaucratic recordkeeping was at the center of ancient Mesopotamian civilization.

Other items in this month’s bureaucratic record:

H. Josef Hebert at The Huffington Post describes the Interior Department and the Federal Energy Regulatory Commission fighting for jurisdiction over wind energy projects.   This is an extremely promising development. Nothing can do more to generate wind than bureaucratic turf battles.

Hoystory notes the California Air Resources Board’s concern about black cars.  Because black paint adsorbs more energy from sunlight than other colors, black cars require more energy to air-condition. We applaud this bureaucratic body for busily evaluating means to combat air pollution and global warming.

Mark J. Perry at Carpe Diem describes the New York State Insurance Department requiring a doctor to change his rate structure in order to avoid being regulated as an insurance entity. Bureaucracies are frequently accused of incessantly seeking more turf.  We applaud the NYS Insurance Department for trying to help a doctor avoid insurance-company regulation.

Jeff Fecke at Blog of the Moderate Left notes that bureaucrats run the health care system.  That’s comforting.  He also observes:

The phone company, the cable company, the credit card company, the health insurance company — these are who Americans think of now when bureaucrats are mentioned.

These bureaucracies are at the center of modern American civilization. Ancient Mesopotamians would be pleased to see fruits of their historical leadership.

Beautiful Fractals displays an artwork entitled, “#24 – The Average Bureaucrat.” Truly beautiful.

In Bhutan, government bureaucrats are being laid off. That’s an ominous development for Bhutan. I suggest further study of whether this action is warranted.

In Russia, the number of government bureaucrats has doubled over the past year. This is a clear indication of further development of Russian civilization in accordance with the ancient Mesopotamian model.

That’s all for this month’s Carnival of Bureaucrats. Submit your blog article to the next edition using our carnival submission form. Submissions should conform to the Carnival’s regulations. Past editions of the Carnival of Bureaucrats can be found on the Carnival’s category page.

Notes:

[1] Basu, Sudipta, John Dickhaut, Gary Hecht, Kristy Towry, and Gregory Waymire, “Recordkeeping alters economic history by promoting reciprocity,” Proceedings of the National Academy of Sciences, January 27, 2009, v. 106, n. 4, p. 1009.

[2] Nissen, Hans Jörg, Peter Damerow, and Robert K. Englund. Archaic Bookkeeping: Early Writing and Techniques of Economic Administration in the Ancient Near East. Chicago, Ill: University of Chicago Press, 1993, p. 106.

intimation

A conversation partitions a table.
A girl stares into her brew.
A mother frets about her daughter
drinking and not wearing
makeup.

I know how babies are made
and unmade.

Sign language is beautiful and invincible.
Every word moves hands and fingers
and sometimes eyebrows and lips, too.

Reason is cultivated like flowers
in a window box.

I know that you
sing to these flowers.

At a crosswalk
a look into the eyes of a man
at the wheel of a steel and glass machine
stops him from running you down.

Once in a while in the morning
you water them.

The action that makes a husband
and wife one can also unite
a master and his slave girl.

All men are created equal.

Movement does not disturb the universe —
it constitutes it
like wind over water
seen through the eyes of fish.

Do more than breathe life into a poem.
One whirling person can keep the world upright.