To establish the TOM, TAM, SOM for restaurants spending on targeted advertisement like Groupon or Seated for a pitch deck.
In order to approach this research, a concrete starting point needed to be determined (independent from the estimated data supplied), therefore the first step was to establish the average advertising spend for restaurants in the US.
- Data from Statista shows that average advertising spending in the United States for restaurants in 2008 was $5.72 billion and in 2014 was $6.46 billion. Conservatively, an assumption can be made that the spend would continue to increase by the average CAGR (1.75%) seen during that period.
- In the absence of more recently available data on the total advertising spend, therefore a conservative assumption on the increase can be applied using the same CAGR rate. Therefore, conservatively, it can be estimated that the amount spent by restaurants on advertising in 2020 will be $7.29 billion.
Next, it is important to establish a baseline to represent the amount of an advertising budget spent on digital marketing.
- Based upon data from eMarketer, businesses spend approximately 54.2% on digital advertising.
- Therefore, it can be estimated that the TAM (and likely the SAM as well) for digital marketing by restaurants would be $3.95 billion in 2020 ($7.29B x 54.2%).
- According to eMarketer, the total digital marketing spend in the US was $129.34 billion in 2019. Thus, it can be estimated that the restaurant industry represents approximately 3% of the total digital marketing spend in the United States.
Notes on the SOM/SAM
To address the request to establish a share of market (SOM), unfortunately without data specific to the current actual customer base or a realistic percentage of the serviceable addressable market that could be captured, this metric is not calculable.
Addressing the SAM will be equally difficult to find as, without specific details for the business, it will essentially be the TAM. The SAM counts potential customers that would be a “good fit” for the business. In this case, it seems it would be anyone that invests in digital advertising, which takes us back to the TAM.
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