Apple 2.0

Covering the business that Steve Jobs built

Apple's 2009 ad budget: Half a billion

October 28, 2009: 12:19 PM ET

Those Get-a-Mac spots aren't cheap, but they deliver a lot of bang for the buck

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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.)

Advertising as a percent of revenue

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:

  1. 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.
  2. 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."
  3. 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."
  4. 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?
  5. 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]

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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