Apple's 2009 ad budget: Half a billion
Those Get-a-Mac spots aren't cheap, but they deliver a lot of bang for the buck
Photo: Apple Inc..
Apple (AAPL) shells out a ton of money for advertising. In fiscal 2009 it spent $501 million, according to the 10-K form filed Tuesday. That's up from $486 million in 2008 and $467 million in 2007.
But half a billion doesn't seem like so much when it's compared with the $1.4 billion Microsoft (MSFT) spent in fiscal 2009, or the $811 million Dell (DELL) spent on ads I can't remember ever seeing.
In fact, as a percentage of revenue, Apple has actually been decreasing its ad spending every year for the past eight, from nearly 5% in 2001 to 1.37% today (1.17% if you use non-GAAP revenue). That's less than half the 3.6% of revenue Research in Motion (RIMM) spends advertising BlackBerries. (See chart below.)
Most recent fiscal year. Source: Company reports
Yet even if you despise Apple and never use their products, you tend to remember their ads. How does Apple get so much bang from its marketing buck?
I can think of five reasons:
- The ads are memorable. Apple spends its money on creative, producing a few clever ads rather than a lot of forgettable ones. Those Get-a-Mac ads are marketing events in their own right, picked up on YouTube and re-played again and again at no extra cost to Apple.
- The ads are well-placed. Apple pays a steep premium to be seen during the World Series or on the back of glossy magazines, but it stays away from the low-cost media where its competitors pour so many of their ad dollars, either directly or through co-op ads. You don't see AT&T (T) advertising the iPhone in newspaper fliers, for example. "Apple doesn't want anyone else promoting its products," says Financial Alchemist's Turley Muller, "just because it is so meticulous and Martha Stewart about marketing and positioning."
- The Apple brand speaks for itself. In Interbrand's 2009 report, Apple was the 20th most recognizable brand name in the world, up there with Coca Cola, IBM and McDonalds. "The Apple brand is the most supported within its industry," according to Interbrand, "and among the most iconic of relatively young brands in the world."
- Apple Stores are their own best advertisement. Sales per store at those 273 retail outlets was down this year ($25.9 million per store vs. $29.9 million in 2008), but traffic was up — to 45.9 million visitors in the fourth quarter alone. How many of those shoppers — bathed in hip music, surrounded by slick Apple products, coddled by preternaturally helpful staffers — left with their reality permanently distorted?
- Word of mouth. While Apple's rating on the American Consumer Satisfaction Index was down 1.2 points this year, that was still 9 to 10 points above its nearest competitors. Apple users tend to be intensely, zealously loyal, and they do the company's evangelical work for free.
Apple spends a ton on advertising. But it seems to be money well spent.
[Follow Philip Elmer-DeWitt on Twitter @philiped]
I'd add a point 6 to your list – the ads are supporting a product that is already perfectly aligned with the customer's desires – rather than hectoring them in to shelling out for something they know isn't really as good as it should be. Customers are't stupid – they can spot when they're being mislead.
This isn't just an Apple story – your numbers look like they could have come from a book I read last year called The Momentum Effect (your data is newer but the underlying message is the same). It (the book) starts with research that show that over twenty years companies on the DJI that lowered their ad spend to sales ratio outperformed the market by a massive margin. Last time I looked the free "look inside" excerpt on amazon included most of the material on this.
This is the key message here – Apple's growth is more efficient than many of their competitors but marketing excellence is just part of the story – it's also about innovation and customer focus. Bang for marketing but doesn't just come from great ads – it comes from using the same customer facing nous that comes up with great ads to come up with great products in the first place. If you're selling a dog the best ads in the world wont't help you shift it.
It's simple. I'm in the UK (yes, we do know that Apple make more than Mp3 players). I have a 17"Macbook Pro, an iPhone 3GS and an iPod. The bottom line is that they work. They don't crash or need rebooting 5 times a day. I am one of those deliriously happy customers that earn Apple their well deserved customer satisfaction figures.
My partner hates Apple, yet uses a 15" MacBook Pro running Windows XP via bootcamp. This machine was bought because at the time no pc manufacturer offered such high quality hardware for the price. Yes, it works but it still needs rebooting on a regular (daily) basis, usually several times, so it's not perfect. Customer satisfaction….? Nowhere near what I experience with my Mac and OS X.
Apple may have stylish and desirable products promoted by a successful ad campaign, but the customer satisfaction they generate is by far their most effective advertising.
In terms of advertising. Take a good look at the new Windows 7 ads. They promote Google (a competitor!) and use a bunch of idiots claiming it "was their idea". Microsoft need to take ownership of their own product and promote it accordingly. They have a lot to learn in producing an effective campaign. They would do well to look at Apple for the inspiration – just like they do in their Windows GUI.
@RattyUK
I don't think so. I've been using a guest account on my Leopard Mac Pro for nearly 2 years and never once lost data.
Am I the only one that remembers Mac Guy chastising PC Guy for putting so much money into advertising vs. fixing Vista– while Apple has a MAJOR flaw in Snow Leopard that permanently deletes user data?
@Ratty_UK — I believe Eric was talking to patches that Mozilla has done, not that *he* had to do them.
Learn to read the comments better. ough that is kind of hard for some Mac users.
Yeah, nothing says 'fanboy' more than statistical evidence…
Go and scan for viruses and get back to reality.
@RattyUK
I think my point was clear. I am not ashamed that all my systems run smooth and my company rather have that then me working my tail off to fix problem after problem. They didn't hire me to work all the time they hired me for my skills and keeping their network running smooth. Simple as that and proud of it. Not sure how your "pc mail server" has fake anti-virus on it? Those things don't just show up you know. Sounds like someone was tricked into downloading fake anti-virus and not sure why you even surf the web on your mail server? I also think I made it clear that Mac is a fine OS, but so in Windows just the same.
Sorry for those people still surfing the web on an XP machine in admin mode, thats just a recipe for trouble and I have called Microsoft out on this many times for defaulting XP users to admin. Vista and 7 are a different breed and do not expose users to the troubles of XP, which is why people should ditch it. All of my XP users here are not admins so I deal with zero malicious software on our systems and they work all day everyday.
Its really upsetting to me to see money.cnn.com publishing so many Apple stories week in and week out. It's like someone there has a vested interest in the company. I for one am so fed up with it I am thinking about switching to another financial site. It's understandable for Apple people to be passionate about their brand, they are taking the road less travelled. I for one like and have many Apple products but I have found that Apple and their folowers have become so pushy and passionate that they are actually hurting themselves and their brand.
I am also upset that many of the stories put a negative spin on Microsoft. Another company whose products I enjoy. The thing is Microsoft's products aren't the best, neither are Apples. What's best for someone is a preference each person has to make for each task they want to perform. I think money.cnn.com needs to be more responsible in their writing and cool it with the Apple promotions.
You might want to consider including the annual marketing cost of the Apple stores, which are a form of advertising. They spend a lot on their displays, environment, experience.
@Eric in Cincinnati,
So to paraphrase you are saying "Windows is fine for me". Great you are very happy. But it then raises the question why are you complaining about this article then? Your original posting seems to be that you have a job where you don't do a lot (I think you were saying that you have a 98% windows shop and you have a lot of time on your hands). Cool but I wouldn't say that too loudly in this economy there are plenty of people looking for work who could "have a lot of time on their hands" for your pay.
So the next point you make is that the commercials are bad. Well they seem to be working, cheap shots and all.
You also appear to be confirming that myth that as market share improves then the attacks keep growing – 11 drive bys patched today (I thought you had lots of time on your hand though?)
The reality appears to be that, for you PCs fulfill all the functions you require. For you information there are quite a few for whom the Mac works just the same. No we are not people who "have no clue" some of us work with Windows too, you know, and for home and work purposes the Mac is doing a pretty good job at being a suitable workhorse.
Off topic I am about to start my day removing some of that lovely fake anti-virus software from a pc mail server. As the technology improves it is all well and good but stopping idiots from pressing "yes" is actually quite hard work
T, Boca Raton, FL wrote:
If we look at 2 companies just by ONE particular number like this, then let me offer you this.
MSFT Gross Profit: 46.28B
AAPL Gross Profit: 11.15B
So, by your measurement Microsoft is making 35.15B more profit by spending 1B more in ad. Really, is that so simple?
It's not! you need to consider number of Products and number of markets offer by these companies (at least) for this comparison. Without that you have a fundamentally flawed report here.
Ratio on gross profit of MSFT to AAPL is about 4:1
Net profits:
MSFT Net Profit: 13.77B
AAPL Net Profit: 5.7B
Ratio on NET profit of MSFT to AAPL is about 2.4:1
on ad budgets of 1400 to 501 or 2.79:1
Looks like Apple spends .35 of MSFT's ad budget to generate .41 of MSFT's net profit.
Apple looks good with this ratio. And you are correct, it's not simple.
MINDSHARE!!!
The point of Apple's adds is:
mindshare first, competitive information second.
Apple punches way above their weight compared to any company in any industry when mindshare is the goal always have and looks like they always will.
Once your an Apple product user you will never CHOOSE to go anywhere else. So obviously they have the best products in every category they choose to play in. NO other company can say that today.
Yes, the "lollipop" ads were for Dell, and yes, they were forgetable, save for the internet buzz surrounding speculation on why one guy was seen popping up from the bottom of the screen while adjusting his clothing, while the guy next to him had a big smile on his face.
@John in Worthing
Well I know that Apple tried to do the Mac V PC thing in the UK (using "local" comedians) but I think that sort of comparison isn't really allowed in the UK advertising market (but you are lucky in not having the ads for Erectile Disfunction medication, Stool Softeners and the ambulance chasing law practices to name but three examples.)
Asking for a US publication to consider "the rest of the world" ain't really going to happen though. Either way I don't think this can explain the figures spent.
Look RattyUK, I don't see the need to spend the money to fix something that isn't broke. I am into managing network systems and Apple is non-existent in that area and my laptop runs all day everyday with no hiccups so not sure why I should change. My point was clear I left them long ago because they didn't feel the need to compete for my profession and there is no way I am gonna scrap my salary so the company can buy high priced servers and desktops, sorry I am just that selfish man. My uptimes are 100% running and I and the company feel no need to do a switch. Plus we use .NET extensivly, which is a great platform for what we do and we are not gonna switch to Java so we can use Macs. I have used OSX and its nice, but nothing that made me say "wow" this is so different and above and beyond. Frankly no one that is a Mac fan has even given me a reason why it is above and beyond, its always "windows sucks" so your should "get a mac". No thanks, make a case and then people might listen.
PED,
I am disappointed to find yet another article that must mention MS. Its always nice to read reviews about products, or learning of the unique ways that a company operates, but I'm finding that these articles are getting harder and harder to read. You're formula seems to have become "explain something about Apple and then point out why MS is wrong". Remember, your very own profile on this page states that "an ounce of skepticism never hurts". I haven't seen that here in a while. Surely there can be an interesting topic that doesn't have to follow the same "this versus that" flow?
I've used MS, Apple, and Linux, and they all have their places. I don't side with any one of these, because I am glad we have choices for different scenarios. But please remember, remaining objective means that you may need to be critical of your subject every now and again. No one's actions are 100% correct 100% of the time.
I'm pretty sure those "Lollipop" ads were for Dell. I remember seeing them a few times in recent months.
You mention the Dell ads that you can't remember ever seeing. Do you think that just because you haven't seen it that it must not exist?
Hi – we're the rest of the world, remember us? Not everything is about the US and the god damn Super Bowl.
Here in the UK, Dell ads are on constantly – and there's rarely EVER an Apple ad on TV. In fact just this year for the first time ever, iPhone ads have started airing every now and then. But that's it. No Mac Vs PC, nothing else.
Just because the numbers are in US dollars, doesn't mean that they're all being spent in the US.
@Eric in Cincinnati,
If you are griping about "apple talk" then you really are saying that you haven't spent any time with OSX. It's like all the PC junkies who hate Macs because "well when I was at college we had 'em and like system 6 really sucked – I am so glad I switched to '95 it was so much better".
You really should try a current machine. Not only does it run all the Mac software but there are at least 3 different ways to run all the Windows software too.
"Outside the US no-one knows Apple.
They think they are a mp3 player company."
Yes Martjin, and people from Europe say that Americans have a small outlook on the world. Sfunny that because it's not like the world is beating a path to the door to get hold of the iPhone in any of it's incarnations. And it's not like it hasn't changed the way smartphones work forever. So keep spouting the nonsense that the rest of the world thinks that Apple "makes mp3 players" – It's rubbish in any language.
Well just for your info I manage a 98% Windows shop from routers to servers to SAN devices and well I got alot of time on my hands PED. I don't save windows systems all day like so many here claim. Sorry about any previous comments, way out of line but I have had items posted and dropped later with no obscene comments at all. I like all technology and used to be a Mac fan in the day, but Mac left me years ago with its proprietariness(ie Apple Talk) and so I ditched the platform. I don't think Mac's suck, I just like to set the record stright for so many that think their thoughts are the lock on reality. I understand you write about Macs and most is directed at many comments on this string. I do think the commercials are bad because they remind me of politics and only attack, attack, attack. I like things to stand on their merits and I think Apple throws cheap shots. Windows is just as reliable as Mac, but Windows does deal with many more attacks than Mac does. For example look at Mozilla now, its market share gets higher and more attacks surface against it. 11 drive bys patched today. Microsoft has made mistakes and alot of those come from trying to please too many people and Mac does not have to deal with this either. But you will never see me attack Mac to make Windows look good, I just like to let reality be known for so many that have no clue.
You PCs trolls can blather on as long as you like, I'm not interested. I wanted the best computer, the best experience, the best OS, the best phone and the best service for it all.
That's why I got a Mac.
and everytime I present facts and reality he will wipe the comment from the board, so don't even try to say that is not the case you just never see them because this is not open for free discussion, its moderated and anything going against the religion is wiped clean. So think about it.
ex ped: Not true, Anonymous (or is that you, Eric from Cincinatti?). Sometimes it takes me awhile to approve a post — I don't spend 24 hours a day online — but I don't believe I've deleted a single one of your dozens of comments. Unless, of course, they were libelous or obscene.
If you've got more facts and reality to present, by all means, please share them with the room.
Hey blad_rnr. Looks like they are emulating Apple commercials so I am sure you are very familiar with it. Hypocrit.
Hey anony-mouse!
That's PED's job! To report and write about Apple. Look over on the right side of the page. It says it right there. If you don't want to read about Apple then go somewhere else.
Are you disputing his links? His info he provided? If so, then bring on some facts.
@Jay and Anonymous,
How can you say PED is in the RDF? He gave quite a bit of stats and links. You? None.
But nice try. Just bash for bashing's sake. Have a nice day.
Way to go Anonymous. You tell him.
But actually as this seems to be about advertising spend there seems to be very little to be subjective about. PED writes about Apple. That is his job. Telling him that he would never make it as a tech is a little irrelevant in that he has made it as a writer (writing for Fortune is a reasonable job in this day and age). So I think your rant seems to be a little off as in you are telling PED off for doing his job.
Wow, another pro-Apple article from Money/Fortune? What type of salary are they earning from Stevie? I miss my good friends Objective, Fair and Balanced. Get off your Apple soapbox and publish real news! I can't believe this site now caters to the simpleton MAC fanboys.
Yeah right PED, you can't bring yourself to speak objectively. It seems to you its a religion of life and will always be that way. I have not once read an article you didn't make an excuse or completely ignore the truth. You are just another mind numbing journalist with no idea of objective journalism and its quite obvious that CNN and Fortune love to keep it that way. You would never have made it as a tech because all you would do is try to find the Apple solution to everything and there is so much more out there than you even know. Looks like the reality distortion field is actually a super massive black hole that is slowing pulling you into its gravity field.
Is it just me, or does PED seem to have gotten sucked into the "reality distortion field" a little further recently? Any more Apple-positive, and Jobs will have to start sending checks.
Not what I am used to, PED. Not saying you have been wrong, but not up to your usual analytical self.
ex ped: Duly noted. I'll try to do better.
Apple spends a small fortune on ads, but that's complemented by a tremendous media relations effort. "Earned media" is almost impossible to accurately measure, but I'd bet the value of Apple's PR effort is exponentially greater than its media buys.
ex ped: Having dealt with Apple PR rather extensively, I'm not seeing it. Free media, yes. Earned media? Not so much.
If we look at 2 companies just by ONE particular number like this, then let me offer you this.
MSFT Gross Profit: 46.28B
AAPL Gross Profit: 11.15B
So, by your measurement Microsoft is making 35.15B more profit by spending 1B more in ad. Really, is that so simple?
It's not! you need to consider number of Products and number of markets offer by these companies (at least) for this comparison. Without that you have a fundamentally flawed report here.
I dislike all negative advertising. To an IT professional, the ads are simplistic and uninformative; but to the general public, they may be entertaining. Either way, I doubt anyone has been influenced by MSFT or Apple advertising to by a particular brand. Rather, these ads just keep the name familiar. What makes people buy one or the other is personal recommendation from people they trust, and/or business need.
Although I have used Apple systems in the past, I'm unlikely to buy another until their business penetration is well above their current 8.3%
Well, Otto…I guess you won't be in the market for Motorola's Droid then, since it's entire ad campaign was a direct assualt on the iPhone. Oh, and forget about getting a laptop with Windows, because Microsoft ran an entire series of ads which among other things, implied that only "cool" people buy Macs. And I guess you won't drive any cars built by companies that compare themselves to their competition, right?
Basically, to decide what products one buys based on corporate ad strategy is reactionary, and quite frankly not all that intelligent.
Google spent almost zero on advertising – its products speaks for themselves
ex ped: Actually, Google spent $266 million on advertising in fiscal 2008, according to its January 2009 10-K. But that was only 1.22% of its $21.8 billion revenue for the year, a smaller percentage than any of the companies mentioned above.
I was just thinking as I read this. You can't complain about the product. Software and hardware work great. So, we need to complain about something! Oh! I know! They spent $500 million on advertising. Oh wait, that is still less the Microsoft. Go figure.
Otto, if you base your buying decisions solely on the overplayed stereotype that Mac users are snobs, then you're doing a great disservice to yourself. Buy the best product (which is usually one of Apple's) and you'll be much happier — regardless of what others think. I didn't understand the whole "superior" thing either until I bought a Mac. Then I realized it was actually true and not a bunch of stuck up idiots spewing nonsense.
What is even more incredible, is that the advertising spend comparison in your table, is really:
Apple $501m
MS/Dell/RIM $2,548
As Apple sells software, hardware and phones as all three others do.
So, it spends just one fifth, and gets massively more value. Quite incredible when you look at it.
There is no doubt that Apple ads have become iconic even though CNN.com displays them in Flash! (see here http://lists.apple.com/archives/QuickTime-Users/2006/Dec/msg00043.html ) however, the issue here is that the business strategy of investing over 2% of gross income into their ads have paid off big. Let other companies see this issue of reinvesting. I can predict that when the iTablet comes up it may reach 3% of gross income. See here (http://www.rorylewis.com/docs/02iPhone/10_iTablet/10_iTablet.htm)
Dr. Lewis
University of Colorado at Colorado Springs.
Computer Science: Epilepsy Prediction
"1.37% today. That's about half the 3.6% Research in Motion's spends advertising BlackBerries"
Statistically, it seems closer to 1/3rd than half.
Also, ad spend growth was only 4% in 2008 and 3% in 2009. Seems like good budget control, too.
Couldn't agree more with how memorable the commercials are. I am always entertained and am drawn to them because I want to see how dumb the PC is going to be. But, alas, my family owns five pc's. Love the Itouch but I have a blackberry. Oh the complexities of life.
The only Dell ads I remember are those "Lollipop" ads that seemed to be on just about every TV channel for a while.
Pretty sad when it comes to selling computers and the best you can offer is a variety of colors.
The ads prevent me from getting an Apple, because it shows that they can't sell their products on their own merits. All Apple is capable of doing is attacking others, and that mentality even extends to their supporters. Bashers and trolls, the lot of them.
Thanks, but no thanks, I won't drink that particular brand of kool-aid. Apple owners are the *worst* possible walking advertisements for Apple products.
Guys like us don't need those cute Apple ads, we are the walking Apple ads. We may not be as slick, but we are a lot more at large and informative about the cool Apple stuff. Had my first Apple IIC when I was in high school (giving my age away). My house IS like an Apple Store for crying out loud!!
Apple targets consumers not corp. That is why you see the dollar spend so easy.
And perhaps , just perhaps you are smack in the middle of the target market, and again that might be why you see the slots.
And perhaps just perhaps you live in a country where apple spend……
MSFT is targeting corps in BRIC EU USA, and consumers around the globe, from giant whoppers in Japan , to sling shot humans in germany.
The steep premium Apple pays to be seen during the World Series or on the back of glossy magazines means it can save a lot of money on cheaper ads? Doesn't make sense.
ex ped: That sentence wasn't wasn't very clear, was it? I've recast it.
forget mac, pc till i die.