Are Absurd Ad Expenses Worth It for Microsoft and Apple?
It’s no secret that companies spend a ridiculous amount of money on advertising. Corporations have been known to spend the same amount of money marketing their goods as they do making them, and it is still unclear whether these efforts pay off.
Last week, we learned that Apple (NASDAQ:AAPL) spent $1.1 billion on advertising throughout its fiscal year that ended in October, and the tech giant isn’t the only company guilty of such expenses. Microsoft (NASDAQ:MSFT) spent double that — a total $2.6 billion figure – in its fiscal year that ended in June.
Prompted by recent reports, Asymco highlighted the exorbitant ad budgets of a handful of high-profile companies on Monday and constructed two graphs to show how each corporation’s respective advertising expenses affect its sales.
Along with Apple and Microsoft, Coca-Cola (NYSE:KO), Samsung Electronics, Hewlett-Packard (NYSE:HPQ), and Dell (NASDAQ:DELL) found their way onto Asymco’s graphs, to help illuminate whether their advertising pays off.
The graphs represent the companies’ previous-year spending figures and highlight that Samsung had the most recent highest advertising budget. Despite the South Korean company’s claim to fame, however, Coca-Cola comes out the real winner in this scenario. The soft drink giant proved itself the most efficient advertiser when it comes to budgeting and making sure to reap the benefits of its labor, as evidenced by its sales totals.
It is also interesting to note from the graphs that tech companies are now significantly expanding their advertising budgets and are overtaking food and beverage companies that have long run the marketing game on account of a need to sell their commodity products.
When Asymco measured the ad budget as a percent of consumer sales, Microsoft comes out on top, but the tech company never used to put such a premium on its efforts to sell its software and hardware — so why now?
Apple, of course, focuses on its marketing efforts, too, but the Cupertino, California-based company actually spends the least on advertising in absolute terms and even less in relative terms. Analysts can take from that what they will, but the author of Asymco’s report believes that the figures demonstrate the reality that the more differentiated the product, the less it needs to be advertised.
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