Are there really black businesses on social platforms? Do they really need funding? Will they ever be big enough or employ enough people to warrant investor or political attention? Without data it’s almost impossible to believe that there could be as many as 6 million black owned businesses on social platforms, many of which are ready to scale. In this post I try to show, using data, that there are between 2 and 6 million Black owned business on social platforms. This is an especially important strategic question because it would show that Black entrepreneurship has shifted online, and this shift needs to be better understood by developers, municipal governments, financial institutions and researchers.
African/African Americans start businesses at a higher rate than the other two groups, exhibiting increasing levels over the past three years.GEM USA 2018/2019 REPORT
In 2012 Facebook acquired Instagram, the great recession was coming to an end, and the US Census Bureau (USCB) did a survey of business owners that estimated there were roughly 2.6 Million African-Americans firms in the US. Of these firms, 109,137 (4%) had paid employees and the other 2.47 million (96%) had no employees, outside of the firms owners. At the end of the last recession, as the economy was turning around, before Etsy, Facebook Marketplace or the rise of Pinterest, 9% of all African-Americans between the ages of 18 -64, were becoming solo-preneurs.
A team of researchers based out of Babson College conduct a survey (over 200k interviews with entrepreneurs in 100 different countries) called the Global Entrepreneurship Monitor (GEM). This group released a report on the state of entrepreneurship in the USA. One of the more interesting findings of the report was that African-Americans start businesses at a rate higher than their Latino and White counterparts. The report looks at the number of “Nascent Entrepreneurs” and ”New Business Owners“ and combines them into a measure it calls Total Entrepreneurial Activity (TEA). It found that the TEA for African-Americans was 26% of AA adults (vs 17% Latinos and 13% Whites). In other words, according to the report, 26% of AA’s (7.6 million people), where engaged in starting or running a new business.
The Census says 9% (2.4 million) of African-Americans are likely solo-entrepreneurs and GEM says the number of nascent and new Black entrepreneurs is 26% (7.6 million). From these number we can start to model what the population of entrepreneurs on social platforms might look, like as long as we know how many African-Americans are on the different social platforms. Thankfully, the Pew Research Center has been tracking social media usage for years and provides demographic data on their users. In a 2019 report on social media usage, Pew estimated the percentage of African-American’s users on serval social platforms. Using this data we can build a pretty good model for the number of AA owned businesses across social platforms. Sure we make a ton of assumptions in the model and mix our data in ways that would make a thesis committees head explode, but we’re trying to answer a business question, not an academic one.
Of the 41 million African-Americans in the US, roughly 29 million are adults between the ages of 18 and 64. Using PEW’s data on social platform usage by Black people, combined with the of 9% AA entrepreneurship rate from the Census Bureau as a minimum and the 26% TEA from GEM as a maximum, we can estimate the number of Black owned/started businesses on social platforms. The table below shows the estimated number of users for the top 4 social platforms for users offering a product or services for sale to the public. LinkedIn, WhatsApp, Twitter and Snapchat all have strong Black user base, but they tend o be used in conjunction with another platform as promotional vehicles for a product or service, not as its primary sales site.
At a minimum, using the USCB rate of 9%, there are just over 2 million unique AA entrepreneurs operating across these social platforms. However, if we use the 26% rate from GEM, then we arrive at just under 6 million entrepreneurs as a likely maximum for the total number on these social platforms. Taking the average of the USCB and GEM rates gives us an AA entrepreneurial rate of 17.7%, which translate to just under 4 million Black business owners on social platforms.
Given the ease of starting a business online and the renewed push towards self-reliance and financial independence in the Black community, these numbers are not surprising. However, it is critically important to have a data based picture of minority business ownership on social platforms, especially at this nascent stage of their development. As user acceptance and usage of these businesses grow, their need for capital investment, policy engagement and local support will expand exponentially. This can only be done with a robust basis in data that provides a framework for investment, development, and strategic action. SocialMBE is working to provide that data and help build the framework for renew investment and attention.