Is Apple's Small Ad Spending a Good Thing?

Apple (NASDAQ: AAPL  ) has long been regarded as one of the best tech companies in the advertising space. The tech giant spends a small amount of its overall sales on advertising, but with Google (NASDAQ: GOOGL  )  stepping up its emotional ads and Samsung (NASDAQOTH: SSNLF  )  and Microsoft  (NASDAQ: MSFT  ) outspending the company, is Apple's strategy still paying off?


Source: Apple website screenshot. 

More bang for the buck
Apple recently released its annual 10-K and reported an advertising budget of $1.1 billion this past fiscal year, up from $1 billion in 2012. That's not a significant increase year over year and it's pretty typical of how much the company has spent on advertising over the past few years.

But to understand Apple's advertising spending, we need to compare it to some rivals' ad budgets. In actual dollars, Apple spends far less. In fiscal 2013 Microsoft spent $2.6 billion, Samsung spent well in excess of $4 billion, and Apple spent just $1.1 billion. Over the past five years, both Microsoft and Samsung have easily outspent Apple, and in 2012 Samsung spent four times more than Apple on its ads. But Samsung has a large number of products, so let's look at how much the companies have spent as a percentage of their sales.

Company

Advertising Expense as Percent of Sales

Microsoft

More than 3%

Samsung

More than 2%

Apple

Less than 1%

Data Source: Asymco .

So in both percentages and actual dollars Apple is spending less than Samsung and Microsoft. As Asymco wrote on its blog, "The stronger, more differentiated the product, the less it needs to be propped up by the ad." But while Apple is saving money on advertising, Google is starting to make gains when it comes to effectiveness.

The Google effect
Microsoft and Samsung have both taken shots at Apple in their advertising campaigns over the past few years. Samsung famously poked fun of Apple consumers waiting in line for the latest iPhone and Microsoft has attacked the iPad head-on its Surface commercials.


Source: Nexus 5 website.

But Google has chosen to take the higher road, and play on consumer emotions just like Apple has famously done in the past. One Nexus 7 commercial depicts an awkward teenager with braces learning how to make a speech in front of his class, and then Googling how to ask a girl out. It plays at the emotions of young love, and at the difficulty of public speaking most people can understand.

Most recently, Google's new Nexus 5 commercial also strums viewers' heartstrings by showing how people capture and experience wedding celebrations across different cultures. It's an ad that's more about people and their experiences than about the device, evident from the product's "Made for what matters" tag line.

Google started its emotional ad shift a few years ago with a Super Bowl commercial about two people falling in love, and the company has ramped up the emotions since then. In a New York Times article from last year, Google's vice president for global marketing, Lorraine Twohill, said: "If we don't make you cry, we fail. It's about emotion, which is bizarre for a tech company."

Google's latest Nexus commercials seem to be on the right emotional path for both the company and viewers, leaving Apple with the need to step up its game. 

Advertising Age reported in September that Apple is increasing the number of employees in its internal advertising and marketing divisions by almost double the current levels. Apple has historically worked with large outside advertising firms for its commercials, but increasing internal staff in these areas could point to the company trying to maintain more control over its advertising. The hiring will be for its iAds, as well as for overall Apple branding, with high-level advertising executives being added to the lot.

Although Apple has done well with its ads in the past, boosting internal hires may help counter Google's rising emotional advertising presence. Apple may not need to spend a lot of ad dollars to sell its products, but revisiting the emotional well will be one key to continued marketing success -- something Google is continually finding true.

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