Do ads work? The ad budgets of various companies

Microsoft spent $2.6 billion for Advertising in the fiscal year ended June. Apple spent $1.1 billion in its fiscal year ended October.

Other companies will report their full year ad spending later but their previous years’ spending is shown below.

Screen Shot 2013-11-04 at 11-4-4.55.03 PM

I added a second graph showing the percent of sales that each ad budget represents. Note that Coca Cola retains the crown as the most prolific advertiser when it comes to budgeting.[1]

However, Microsoft is climbing into a region of 3 to 5% of sales. What’s even more striking is that we can isolate the revenues which are actually being targeted by the ads: consumers. Microsoft’s Business and Server and Tools divisions may have some ad budget but it’s likely to be much smaller than the Windows, Entertainment and Online divisions.

When the ad budget is measured as a percent of consumer sales, Microsoft suddenly looks like the biggest spender overtaking even Coca-Cola.[2] I don’t know what to make of this. It seems extraordinary that Microsoft needs the same level of effort to sell software (and some hardware) as Coca Cola does to sell soft drinks. Coca Cola spends heavily to preserve brand value for what is essentially a commodity product. Is this the way to read Microsoft’s marketing?

It’s also interesting that Apple spends the least (nearly) in absolute terms and fractionally less (one twelfth) in relative terms. This is in contrast to the alternatives above. The stronger, more differentiated the product, the less it needs to be propped up by the ad.


  1. Think of it as 7 percent of every Coke purchase going to pay for the ad that presumably got you to buy it. []
  2. Note that Samsung can also be similarly split into consumer vs. total. []
  • It’d be very interesting to see Google’s ad budget. I bet it’s very small compared to the rest, given the fact that Google is itself an ad platform.

    • nuttmedia

      Fits in with Horace’s axiom above — Google does very little promotion around its strongest, most differentiated product, Search, and has focused much of its advertising around its Chrome-based products, both hardware and software, as those lines compete in a very crowded space. But if you segment those costs against revenues generated by Chrome….

      • DaveChapin77

        How would GOOG report an ad expense for ads on their own platform (search adsense)? Some kind of formula based on opportunity cost?

      • nuttmedia

        I’d imagine it would be more straightforward — record the revenue on the top line, and the corresponding expense under “sales and marketing expenses” (and “Cost of Revenues” if the ad was placed on a third-party Google Network Members site)

      • obarthelemy

        Companies do it all the time: internal (transfer) prices.

  • dicklacara

    I suggest that Microsoft is trying to establish its “brand” in the mobile hardware and OS market.

  • Venky

    It might be interesting to see this with the addition of operator spending, close to 13% and 19% of total spending by AT&T in 2012 was for Apple devices and Android devices respectively. Similar is the case when it comes to Sprint as well. In the case of Verizon which has one of the biggest ad budgets spent close to one third of its total advertising budget on promoting Android devices. So when the demand for Apple and Android devices is so high and with the operators spending such significant amounts atleast int he US there might not be a need for additional spending by Apple and Google again but in the case of Microsoft this additional push I guess is justified…

  • mjw149

    I’d be interested in seeing the PC OEM’s budgets grouped with MS and Intel, since that Wintel-OEM relationship is really the same as Coke-bottler. All that advertising is pretty much consumer-based, too, since Windows and Intel has enterprise locked up afaict.

    I’m not sure what to make of all the advertising by MS. Clearly they can keep non-viable products in the market – they lost a billion on Surface and are fine, BBM lost a billion and are given up for dead. But is that because it’s a commodity or a failed value proposition/business model?

    The software is definitely a commodity, but is the platform, too? Is a second tier platform just a commodity? If so, who else is below Google/AMZ? icloud, salesforce, dropbox, spotify? Or is access to those platforms the commodity, and the first class mobile OSs are differentiated on that (by getting the apps first and having the best cloud features built-in?)

  • EW Parris

    Wait! Apple is only successful because… Marketing!

    Perhaps Microsoft has drunk its own koolaide and believes the secret to hardware success is marketing.

    That will end well. Maybe we’ll see Jerry Seinfeld and Bill gates eating churros again before too long.

    • airmanchairman

      What’s the significance of Churros? Is it the American equivalent of “eating crow”?

  • These graphs are great. In particular, the MS / Apple comparison because so much of their fundamental differences are encapsulated in a single number.

    MS advertising is *much* less efficient given complex product lineup and flawed distribution. They understand this is a cost of their model and expect to invest more heavily per unit in the early stages.

    Apple can spend a $ on advertising and say “buy this exact Apple product at this Apple store”.

    Microsoft is saying something like “buy a product from one of many OEMs that might have some of these features”. They can’t tell you where to buy it because that is product/OEM specific. Or they put their ad $ into co-marketing deals with OEMs where they don’t have complete control over the message. And they can’t guarantee consistency between the messages from different OEMs. In phones MS/Nokia tackles this problem.

    The other interesting thing is how being first to (success in) market reduces the overall advertising investment you will need to do over the lifetime of the product category. By essentially creating the music player, smartphone and tablet markets Apple has massively reduced its advertising investment. Other players have to invest much, much more because they have to overcome the position that Apple established.

    • mjw149

      I think this is the great known unknown about Microsoft’s transition.

      As an enterprise player, it did advertising ‘differently’. It was very broad, as you point out, and to be effective it had a vastly different model. Microsoft has/had ‘evangelists’ to stay in touch and entice you to conferences, it gave away freebies like candy to IT folks as a way to persuade decision makers. It’s very pharma industry-ish (for you Americans, you know what I mean).

      As a consumer player, little of that stuff applies. I’ve seen anecdotally that MS employees are more active on consumer websites, but that was always the case. A ‘broadcast’ advertising message is far different than their grassroots tea party type style of whisper campaigns and bribes and simple messages.

      They’ve played that game well enough with xbox, but not to the degree of the truly savvy – Sony regardless of product mix usually out-messaged and out-marketed MS, I’d say. It always spoke to a certain hardcore, after all.

      This is another big shift in their organization that needs to be sorted out, I would think.

      Off-topic, where does their enterprise evangelization go, now that they’d pushing cloud-based solutions that ultimately eliminate their core customers as part of the pitch? It’s a tough row to hoe and I think that’s part of the consumer push – like with Apple they want decision makers to choose their consumer tech or opt for a freemium model to lock in the business level subscriptions. Get comfortable with skydrive at home, deploy it at work. Use Surface at home, ask for it at work, etc. Microsoft becomes the IT department.

      Once again, this shows the potential and importance of their physical retail presence. If IT pros increasingly can’t be coopted as evangelists, they need presence through other means, now, before it’s too late.

      • Totally agree on the importance of the MS retail presence in this. I experienced that recently (purchasing new laptop for my parents) and it was a giant leap forward. Not quite Apple Store, but pretty close.

      • Just a note: oddly enough US pharma US is probably less pharma-ish than most other western nations owing to a loophole in advertising regulations (i.e. pharma in the US advertises prescription meds direct to consumers in a way that’s forbidden in most civilized nations, and was thought to be forbidden in the US). It’s been a long time since I was in the business, so I’m not sure if this just means US pharma spends even more on marketing in the US (to cover TV ad buys, etc.) or it cuts its marketing pie differently or a bit of both, but drug reps and freebies to doctors are not the main driver in the US (political corruption and creating consumer demand instead).

  • nuttmedia

    Overall, would also interesting to segment brand vs direct advertising costs. Brand campaigns are considerably more expensive and are likely the drivers behind any upward trends in the above graphs. Also helps explain why Coke’s spend is a consistently higher proportion relative to sales.

  • obarthelemy

    I think Ad budget should also be put in perspective with
    1- number of products. Though there’s some splash effect, ads are usually about one specific product, or line of products at most.Pushing a couple of phones and tablets requires less advertising than pushing tens of each, let alone SQL databases, fridges and TVs.
    2- market share change. Maybe ads aren’t so much about marketshare, as about marketshare gains.
    3- free PR. how much exposure do products get counting paid aps + free PR ?

    • handleym

      So in other words you’re back to the standard whine of the loser: “the other team is playing unfair by refusing to accommodate my weaknesses and incompetence”.

      Didn’t work in Vietnam, won’t work here.

      • obarthelemy

        I don’t see a whine, and looking at recent figures I’m not sure who the loser is.

      • helloworld

        Since girls only date guys with iPhones, it’s pretty clear who the loser is.

  • stefnagel

    Coke is strong and differentiated, but then sugar water takes some selling.

  • professortom

    Something to keep in mind about Samsung’s numbers is that they do make more than just phones and tablets (i.e. refrigerators, washers, dryers, dishwashers, etc.). Do the numbers above apply ONLY to phones and tablets?

    • No, it includes handsets, consumer electronics, TV and Appliances. Excludes semiconductors and displays.

      • professortom

        Is there some proxy we can use to deduce the number that is being spent on advertising for just phones or maybe phones and tablets?

      • KirkBurgess

        Apple sells phones, tablets, PCs, iPods, music, video, software, accessories (and perhaps soon TVs & wearables).

        Comparing samsungs entire ad budget for its consumer electronics portfolio seems fair and I don’t see a need to try and break it down by catergory. The only thing that seems slightly out of place is whiteware – but I don’t recall seeing many Samsung whiteware ads so its likely a minuscule part of the budget,

        In fact whiteware might someday soon be intelligent consumer lifestyle products that would fit in even within apples portfolio. Is a fridge that tells you what meals you can make from what it contains, and then talk you through how to make them not something that would be considered high end consumer technology?

      • John

        I would guess that phones and tablets get the most money and spiffs considering that they are the most profitable lines.

        Listening to the Cubed podcast, Samsung could be paying $50 in advertising and spiffs for every phone sold. Or was that just spiffs, I’ll have to re listen.

  • Seems obvious to me that Microsoft expected a boost in consumer sales commensurate with the increase in ad spending. I doubt they planned on writing off $900B in Surface inventory.

    • Kizedek

      I think everyone plans for and expects “boost in consumer sales commensurate with the increase in ad spending” when they advertise… else, why advertise at all? The question is, how effective is your advertising and what is the return?

      If MS’ ROI is poor, then one possible (likely) explanation is that the products(s) don’t live up to the advertising.

  • John Kneeland

    For a company to try and break into the market like this, advertising is necessary but insufficient in its own right. However, Microsoft is fortunate in that it is one of the few companies with enough money that it can make it past that first “necessary” hurdle.

    As I have no interest in living under an Android/iOS duopoly, I wish Microsoft all the best in breaking into the market.

    • handleym

      Apple did not need to spend a fortune to “break into” the pre-existing and well established market of phones. A good enough product speaks for itself.

      MS is playing the same game as Coca Cola, trying to convert an undifferentiated product into something unique through advertising. This is unlikely to be successful, especially in the tech space where you don’t have the decades of familiarity, history of emotional resonance, blah blah, that a company like Coke can exploit.

      • claimchowder

        Not sure if calling WP undifferentiate” is right. It appears very differentiated. The problem more likely is that it doesn’t solve enough problems fpr enough people because it is lacking in many areas.

      • Walt French

        I’d like to know what is differentiated. Does the phone have special Office features that others don’t get just as right? Does it automagically share files with its desktop and mobile siblings? Does it have a whole different set of apps that aren’t in the same ballpark as what you can get on Android or iOS? Is the app integration so powerful that you can do likely things that are kludgey or limited in iOS?

        The only differentiator I’ve seen is the Nokia quality/distributor history (including, “cameras!”). That’s disappearing. What’s left?

      • obarthelemy

        1- Live Tiles (not as good as widgets, but much better than icons): you can see what’s important to you right on your home screen.
        2- sizes and prices: you get a choice of how much you want to spend, and handle
        3- camera in some models
        4- maps/transport in all models
        5- hardware and software design (I personally find the very flat UI design simpler and easier)
        6- 3 buttons. Like for mice, more is more.

      • claimchowder

        Different OS, different UI, different set of apps and services.
        Different, not better. But certainly different.

        I infer from your comment, Walt, that in marketing “differentiated” is apparently associated with an improvement instead of the generic meaning of the word. Please correct me if I’m wrong, I’m more of a techie type.

      • Walt French

        As I noted above, I’m not close to marketing as a knowledge area, so I don’t know of any specialized meaning.

        My point was just that having a blue logo versus a yellow one is not “differentiated” in any way that could actually matter beyond the knowledge of who made the product. Yes, the NT underpinnings of WP are different than the BSD underpinnings of iOS and the linux underpinnings of Android, but it is the job of developers to make these differences near-invisible. I can’t name a major functionality on any of the three that is particularly different due to the OS. For all the delay and expense of shifting from WinCE to WP, it primarily puts WP on equal footing with its two larger competitors.

        If products are undifferentiated, they have to compete on price or brand identity. That prevents monopoly profits (good) but doesn’t really do anything to advance the technology itself (not so).

      • John Kneeland

        I am not saying the iPad is not a good product. However a large part of its goodness stems from its first-mover advantage (the first tablet as we understand tablets to be), which in turn gave it an ecosystem lock-in advantage. Obviously this is an advantage that is impossible for anyone to replicate (there can only be one first-mover, by definition) There are two responses to this:

        1) give up
        2) invest heavily in marketing, product, and ecosystem development to catch up to a level that company considers acceptable.

        I don’t know why anybody save for Apple shareholders would want Microsoft and Google, Amazon, etc to go for option 1). I like choice and competition, personally.

      • handleym

        You are completely missing the point. The iPhone was not the first phone, neither was the iPad the first tablet. What they WERE was the first phone or tablet “as we understand tablets to be”.

        In other words, Apple succeeded by creating a product that was substantially superior to what existed before.

        MS COULD in theory do the same thing: create a phone or tablet that is substantially superior to what exists before. They have not done so. What they have created is two “me-too” products (WP and RT) and a product that is more or less different to what existed before (Surface Pro) only nobody seems to be want what Surface Pro is.
        (Not to mention MS’ cocked up OS strategy which involves constantly obsoleting their previous phone OS, and being unable to figure out the future of their mobile OS.)

        Like Obarthelmy you are making excuses. MS’ problems (and need for advertising) stem from the fact that they have adopted a me-too strategy. THAT is what compels them to have to advertise aggressively.
        But that is not the only strategy. There is the “ship a better fscking product” strategy. Why was this not open to MS?
        Is Apple, by natural law, the only tech company capable of innovation that actually makes a difference?

      • Mary Branscombe

        Apple ran adverts for the iPhone for six months before it shipped, showing how to use things like pinch zoom – so really, training videos 😉

      • John

        I had a Toshiba transformer-style notebook/tablet with stylus back in summer 2003. I’ve been waiting for a tablet specific version of Office since then, 10 years!

        That’s the problem with Microsoft.

      • Walt French

        Point taken. However, today’s collapse of the BlackBerry deal is a reminder that the first-mover advantage is strong. So strong, I’d say, that the label belies what’s really happening: an intense, focused commitment on an unknown market, for which outsized rewards are expected if successful, and for which outsized losses — 100% of the R&D — is not unlikely.

        As an investor, I have a bias towards smart R&D, rather than the advertising approach that I think draws the less intelligent, less profitable customers. But yes, you can’t be the leader every time and who is actually the leader versus the follower is not crystal clear.

  • Mary Branscombe

    Does this include the *significant* co-marketing budget that Microsoft has for partners; every quarter there are multiple co-marketing deals with OEMs, cloud partners, enterprise app partners, Office marketing with OEMs… Also, we know from the financial results that marketing is paid for by division ( so you can map marketing by segment group too

    • This includes only advertising as declared in the 10-K filings.

      • Mary Branscombe

        so either that’s included or the real-world figure is higher

  • Walt French

    @Asymco wrote, “Think of it as 7 percent of every Coke purchase going to pay for the ad that presumably got you to buy it.”

    I’ve never understood advertising in much depth, but presume that Coca-Cola, with its huge global business that’s highly reliant on it, is expert on knowing how to maximize profits through the level and type of advertising in different markets. I sure don’t see evidence contradicting that idea.

    I suppose I ought to give the same credibility to an organization whose CEO spent a couple of years at P&G—another world-class marketing expert—before joining his current and soon-to-be-ex company. But I don’t.

    So in line with my comments about the substitutability of labor, leased capital and purchased capital, I’d take the Apple/Microsoft comparison to indicate that Apple instead applies its resources to discovering that magic moment when the stars align for a product or capability — carefully projecting where the technology puck will be, where consumer preferences, budgets and alternatives will be, and what Apple need to build in the way of OS or manufacturing or retail structure, to get there to be able to slap it into the goal. It’s not that hidden, how Jobs spent a decade understanding how to retail before rolling out true consumer products. … how the iPad was kept on the back burner for almost a decade until the price/tech/networks/need was there.

    Methinks it’s not so much that Microsoft finds it necessary to spend a lot on advertising, it’s that they find themselves about 10 years behind Apple in New Capability planning, and until they build all the underpinnings that their supposed transformation to a functional organization needs, they’ll have to fake it with ads.

    (Oh, let’s just savor a moment, too, of remembering all the Microsoft advocates who said Apple was all about “marketing.”)

  • berult

    Geeky buying habits aside, for a dollar spent on an Apple product, roughly 0,40 cents constitutes a direct subsidy to a permanent advertising campaign. Pure commitment to the Brand that snowballs into lockstep emulation and, as co-sinusoidal double entendre defaults, collapses the bridge to Lalaland.

    It all starts with a great product. Worth committing for. And you’re in for commoditized advertising for the long haul. A reversal of fortune, the sine revolution.

  • It is not clear many instances of Microsoft spots are aimed at consumer. Who is a full page ad “Aston Martin is now on Office 365” in the latest ed of The New Yorker aimed at?

    • Walt French

      Per the NewYorker’s media kit: affluent, well-educated couples, approximately 60% of whom are over 45. That’d include a lot of upper management types who would be capable of wanting to associate their company with the Aston Martin brand’s prestige.

      Apple frequently drops the ~$200K for a back cover ad (where a high fraction of the 1mm subscribers would be very likely to see it); I think that 20¢/impression is money better spent than Microsoft’s, as the fit is better to the demographics. (Only half of their subscribers show as full-time employed so likely are the at-home wives of the people Microsoft would be wanting to reach.)

  • obarthelemy

    “The stronger, more differentiated the product, the less it needs to be propped up by the ad.”. Then again, Apple’s sales are actually down y/y for the last quarter in all segments except phones: PCs, iPods, iPads ( also down for the full year, except iPad), and market share in mobile has cratered (iPads from 80% to 30% in 2 yrs, iPhones to around 15%). This must be quantum something :-p

    • Mark Jones

      – Aren’t PC sales down for everyone except Lenovo?
      – When was the last time Apple introduced a new iPod?
      – Apple sold more iPads last quarter than the year ago quarter. Where are you getting your data?
      – When will you realize that smartphone market share, and tablet market share mean nothing, given that $50 smartphones and tablets are included just because they run Android?

      • obarthelemy

        “just because they run android” is enough to be a smartphone.

        The criteria for smartphones haven’t been legislated, so I make my own which are: browse the full (desktop) web, installable apps, and enough memory for 10 games and a few hours of videos. I think placing the bar higher would be tantamount to saying cars with no AC, power steering, nor GPS aren’t cars. Or pizzas w/o anchovies aren’t real pizzas :-p

        as for my sources for bare figures: Indeed iPad is flat not down, sorry.

      • Space Gorilla

        Sigh. Not this again. Some reality, sales by fiscal year:

        2010: 7.5 million
        2011: 32 million
        2012: 58 million
        2013: 71 million

        2010: 40 million
        2011: 72 million
        2012: 125 million

        2013: 150 million

        I won’t be replying to whatever nonsense you post back.

      • obarthelemy

        iPhone: 13Q4=33.8/12Q4=26.9
        iPod: 3.5/5.4
        Mac: 4.6/4.9
        iPad: 14.1/14.0


  • I wonder how much of Microsofts budget goes back into it’s own ad platforms.

    And are you factoring in that this probably covers all of MSFTs separet business units (i.e. skype, xbox, windows, msn, phones etc)

  • hiramwalker

    Apple needs to use ads to counter the false memes that fuel Android. Feel good ads are all well and good, but a little positive information about the eco system and superior performance can help counter meaningless specs. Perhaps Justin Long could have a chat with the green robot.

    • EW Parris

      I don’t think Apple needs to do that at all. No one buying a phone cares about speeds and feeds and everyone buying a phone already knows about iTunes and the App Store.

      Nothing says desperation like letting the competition dictate your marketing.

  • Tech journalism has become product journalism so Apple gets a massive boost from all the free stories written about it and its products. A decade ago it would have had to spend a lot more on advertising to get its name out in front of consumers. Microsoft’s products are mostly in enterprise space which has always been expensive to sell to.

    • François Prigent

      Exactly, it’s way more expensive to target B2B decision makers and there’s no need to explain why. Also, a lot of tech journalists did free advertising for Apple products in the last decade.
      And there are side effects to it :
      1) IT industry moves fast and I don’t think Apple can stand as premium brand for long anymore
      2) “Apple style” ads are delivering almost no value in digital advertising, because there is zero differenciation vs competition, and also a strong lack of storytelling

      I guess it’s no surprise I’m seeing a surge of ads for Google products these days (especially Chrome – who said it’s the first layer before Android ads?)

    • Walt French

      I go back to having read that same issue of Popular Electronics that supposedly motivated Allen & Gates to get moving—the one with an Altair computer on the cover. So I’ve been tracking tech journalism for as long as there’s been storytelling about PCs and I refute the notion that Apple now has bonus publicity.

      If anything, since journalism has to call out the unusual and the unexpected, I’d say today’s articles give Apple short shrift. There are gee-whiz articles about watches, glasses, whatever is new, regardless of its potential.

      And rightly so. Just as there used to be magazines oriented to owners of individual models of cars (Packards International Motorcar Club, anyone?) and aren’t today, the whole intention of Apple is to make its products so mainstream that you don’t even need a manual. Apple’s publicity efforts are real but they are so effective because all they needed to do was to communicate how anybody could use ’em.


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