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SUMMARY:
There’s a certain conventional wisdom in the American marketing industry – anything that matters happens in New York (the world center of business) or California (home to Silicon Valley and Hollywood). However…that doesn’t necessarily mean that these states offer the best opportunity for your digital marketing agency. So when I came across some data that challenged the status quo, I wanted to share it with you. Read on for a never-before-published analysis that DesignRush provided exclusively to MarketingSherpa. |
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The team at DesignRush created a compound index to identify states that have overlooked opportunities for digital business growth (scroll to the bottom of this article to see the methodology). According to Mariana Delgado, Marketing Director at DesignRush, “This knowledge can help agencies make informed decisions about expansion, relocation, and strategy.”
I liked this data because it challenged the conventional wisdom: ‘marketing that matters happens in New York (the world center of business) or California (home to Silicon Valley and Hollywood).’ OK, those states do have brand recognition, and we marketers love compelling brands.
But before you launch or move your digital marketing agency, consider some of these other factors as well. “States with lower tax burdens and high market demand offer significant growth opportunities, whereas high taxes and market saturation can impede profitability,” according to Gianluca Ferruggia, General Manager, DesignRush.
Chart #1: The hottest states for digital business growth in 2024
At 82.3, West Virginia had the highest business potential score according to the team’s methodology.
West Virginia did so well partly because it has the fewest digital marketing agencies of any state – only 75. This is the ‘hit it where they ain’t’ philosophy,’ right? It’s a great place to have an agency because there aren’t a lot of digital marketing agencies there.
Kansas had the third-highest business potential score at 80.6. It was helped by the highest business opportunity score of any state at 0.9, due to a favorable ratio of agencies to search interest (see methodology at the bottom of this article for how that is calculated).
California had the fifth-highest business potential score – 77.9. There’s a lot of competition, a high market saturation with 11,595 agencies.
But that competition is offset by a high demand for services. It has the highest global search volume for digital marketing services with 2,633 global searches per 100,000 population. And California has the largest economy in the nation, with a GDP of $3,862,171,000,000. This robust economic environment supports the strong demand for digital marketing services, giving it a high business potential score despite the state’s considerable competition.
However, if the type of companies in a location don’t match your value proposition, that demand may not matter. For example, while RiseOpp is based in San Francisco, the majority of its clients are in New York City. RiseOpp founder Kaveh Vahdat told me this about San Francisco, “It is full of certain tech-type businesses. Our primary popular service is SEO, which is a better fit for businesses with recurring revenues than for startups that have just raised funds.”
So now, while RiseOpp is based in San Francisco, it’s really more of a technicality.
“We transitioned to fully remote operations during Covid while retaining our address. Even before Covid, being located in San Francisco didn't yield the expected results. It was expensive, and the network impact wasn't as targeted as we needed,” he said. “However, I can't say the same for all areas in California. There are specific areas in California, such as cities around the Sacramento area in Northern California, that offer a better reward/cost ratio, with much lower operational costs, high-quality talent, proximity to the San Francisco technology hub, and a more diverse range of business types.”
Another factor to consider is that laws and regulations can vary by location. “Individual states are enacting their own privacy laws, like the CCPA in California. So, your location has a big impact on how you’ll be able to do business and fairly collect consumer data without landing in legal hot water,” advised attorney Mark Pierce, CEO, Wyoming Trust.
Florida had a business potential score of 77.9, just barely making it onto the chart of hottest states for digital business growth at #10. The Sunshine State was hurt by having the second-highest number of agencies – 7,693.
While this data is helpful to understand business factors in different states, it doesn’t look at another crucial factor – a nice place to live. If you’re a digital marketing agency owner and looking for a place to launch or move your agency, that might be an important factor. After all, that’s a great thing about being the head honcho – you get to choose where you live.
For example, I live in Florida. I love Florida’s mix of beautiful beaches, a mild climate, and decent cost of living (at least compared to major agency towns like New York City and San Francisco).
But of course, Florida isn’t for everyone – there’s the hot and humid summers, hurricane risk, and limited public transportation.
You have to understand the tradeoffs and find the right mix that works for you. And that’s the biggest takeaway from this data for me – it gives you factors to explore that you might not have considered when judging these tradeoffs.
While we share the states with the 10 highest business potential scores (above) and the 10 lowest business potential scores (below), that means there are 30 states that fall somewhere in-between.
For some businesses, these states may seem like Goldilocks – neither too hot nor too cold.
Take Arizon for example, which was right around the middle, with the 31st highest business potential score (67.6) and the 23rd lowest tax efficiency at 93% (with 100% being average).
"The upside of an agency being located in Arizona is that we are a huge SaaS and tech hub. So there are a lot of clients that need SEO right here. It is not that they have to work with someone in Arizona, but people like to work with people they can meet and see in person. When companies are located in Arizona, we have the opportunity of being able to go over and meet them face-to-face, take them to lunch, and develop a stronger connection. If we were located in more of a remote area, we unfortunately wouldn't really have that benefit," said Christy Olsen, Managing Partner, CadenceSEO (based in Gilbert, Arizona).
Chart #2: The worst states for digital business growth in 2024
Minnesota was ranked as the worst state for digital business growth, with a score of 55.7. It had the second worst tax efficiency – 82% less efficient than average. It also had more agencies and less search volume than the state with the worst tax efficiency, Missouri.
Missouri had the third lowest business potential index at 58.3. Its ranking was pulled down by a relatively high tax burden. The average tax paid by agencies in Missouri was $4,127,000, which is 92% less efficient than average.
In summary, while traditional hubs like New York and California remain significant, states like West Virginia and Kansas offer unique opportunities for digital marketing agencies. Consider these unconventional insights when planning your next move.
This article was distributed through the free MarketingSherpa email newsletter.
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The Business Potential Score is a composite index designed to reflect each state's potential for conducting business in digital marketing. It is derived from three key metrics: Business Opportunity Score, Tax Efficiency, and GDP.
The three metrics were normalized to a scale of 50-100. Each metric was then weighted and averaged to create the overall Business Potential Score. States are ranked based on their Business Potential Score, highlighting their attractiveness to digital marketing agencies.
This score is calculated as the ratio of digital marketing agencies per 100,000 population to search interest per 100,000 population using the following data sources:
Population per state – American Community Survey (ACS) from census.gov
Number of digital marketing agencies – Country Business Patterns from census.gov, counting establishments under NAICS codes 54181 and 541613
Search interest – Google Keyword Planner search volumes for the following 20 keywords related to digital marketing services over a one-year period:
This metric represents the percentage of taxes paid by a digital marketing agency compared to the national average using the following data sources:
State tax data – Internal Revenue Service (IRS) SOI Tax Stats - State Data FY 2023.
Tax estimation for digital marketing agencies – Derived from the share of agencies out of the total number of companies.
The data source for Gross Domestic Product (GDP) by state was the Bureau of Economic Analysis GDP by State.
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