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13.08.2022 Neil Patel
The Larger the TAM The Easier it is Market
The larger the TAM, the easier it is to market. Have you heard of the word TAM before? It stands for total addressable market. For example, the global healthcare market is a $2.5 trillion industry. That's massive. On the flip side, the web analytics market is roughly $10.7 billion and that's in 2026, according to Allied Market Research, and it's not even 2026 yet. The reason I bring up web analytics is few of my businesses were web analytics businesses in the past, and I wish that it went after much bigger markets.
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See, in the past, none of my businesses were really massive compared to what I ended up creating later on in my career as an entrepreneur. Why? Well, the biggest reason is, is I went after companies that were in really small markets at least when you compare it to markets like health insurance. This lesson took me roughly 15 years or so to fully understand.
And investors would always tell me is the market big enough? I'm like, yeah, it's a 10 plus billion dollar industry, but you're never going to gobble up the whole industry. You're only going to gobble up a fraction. Might as well go after a multi-trillion dollar industry and gobble up a small fraction. It's much easier to build a bigger company. And when I started out as an entrepreneur at the age of 16, I built companies that solved problems. These problems, in many cases, were related to the marketing niche, but there are only so many people, or companies, that needed these solutions. And the companies did well, and they made millions of dollars for myself.
But I wasn't able to build really massive multi-billion dollar companies from these markets. Why? Because the TAM was too small. Now, my ad agency, NP Digital, is one of the fastest growing companies I ever built. Technically it was the fastest growing company I ever built, and it was the 21st fastest growing company in America according to "Inc. Magazine."
Main reason is because the TAM for ad agencies is much larger than, let's say, web analytics. Heck, there's ad agencies, even single ad agencies, that are worth more than the whole web analytics market.
Now, if I had to go back in time, yes, I would've picked a bigger TAM. I'm not really sure what industry I would've go after, but I definitely would've picked a bigger TAM because it's easier to market in bigger markets. Yes. The bigger the market, the more competition you also have. But it's easier to build a company that has seven figures or even 10 plus million dollars in annual revenue when you're going after a massive TAM. Because it's just a fraction of percent that you'll need to do well.
Same thing with marketing, you don't always have to focus on search volume or cost per click. Instead, focus on TAM. You'll find that the bigger the TAM, the easier it is to market and to do well. That's what marketers forget about when they do the marketing. They focus too much on search volume, and conversion rates, and market research, versus just making sure the TAM is big enough.
Look, almost everyone in the United States needs health insurance. Heck, most people in the world need healthcare. That's an example of a big TAM.
Now, I'm not saying you need to go after a TAM that's that big, but that gives you idea of how big a market could potentially be. And you got to figure out all right, what's best for you?
Now, whether you have a small TAM or a big TAM, if you need help gobbling the majority of that market share, check out my ad agency, NP Digital. We were the performance marketing agency of the year because we provide amazing results. We can help you do better as well.
If you enjoyed this video, like it, share it, tell other people about it. Thank you for watching. I truly enjoy you taking time out of your day to watch this video. Thank you very much.
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