Unless your name is The Coca-Cola Company (NYSE:KO), which sells its products in all but two countries around the globe, or you are the sprout from which nearly all technological innovation over the past decade has sprung (i.e., Apple Inc. (NASDAQ:AAPL)), then chances are advertising is a key component to success.
The interesting tidbit that goes along with advertising is that more dollars spent does not necessarily translate into more dollars brought in. Also, it depends on what type of advertising a business is targeting as to whether or not the ad campaign is ultimately successful.
Luckily for us, research firm Advertising Age did all the hard work and compiled its annual list last year of the companies in 2011 that spent the most on advertising. Not surprisingly, 36 companies, even including the aforementioned Apple Inc. (NASDAQ:AAPL), spent in excess of $1 billion in 2011 on ads.
What I intend to do today is have a look at the top five spenders in terms of dollar volume, figure out what these companies are doing right or wrong, and determine if there are any investing lessons to be learned from the type of media or audience that these businesses are targeting.
No. 5: AT&T Inc. (NYSE:T), $2.36 billion
No. 4: Comcast Corporation (NASDAQ:CMCSA), $2.47 billion
Speaking of the most hated company in America — at least in previous years – Comcast takes fourth with nearly two-and-a-half billion in ad spending. Comcast is really pushing simplicity under one bill with its Xfinity offering, which combines phone, Internet, and cable under one plan. What this plan really appears to be is a disguised attempt to detract consumers from a growing trend of cutting ties with their landline phone. Although landlines aren’t big growth drivers for Comcast Corporation (NASDAQ:CMCSA) anymore, their low maintenance costs result in big margins. Comcast is certainly doing what it can to improve its image, but it still has a long way to go with consumers.
No. 3: Verizon Communications Inc. (NYSE:VZ), $2.52 billion
Are we noticing a pattern here in the first three companies? Telecom and Internet service providers are widely disliked and competition is incredibly fierce, meaning these companies have to literally browbeat consumers with their strengths over and over in order to drive home their point. As I stated previously, Verizon’s turnover rate tends to be higher than AT&T Inc. (NYSE:T)’s, but it also has a considerably more advanced LTE network that could give it the upper hand in the coming years. Targeting the younger generation will definitely help move the needle in Verizon Communications Inc. (NYSE:VZ)’s favor.
No. 2: General Motors Company (NYSE:GM), $3.10 billion
I actually found it very interesting that General Motors Company (NYSE:GM) spent nearly $1 billion more in 2011 than rival Ford Motor Company (NYSE:F), yet the latter has seen considerably better domestic results since then. General Motors has had to spend heavily to rebrand itself after emerging from bankruptcy in 2010. With Ford having an edge among younger buyers with its more fuel-efficient EcoBoost engines and General Motors Company (NYSE:GM) growing at a slower pace in emerging markets like China relative to Ford Motor Company (NYSE:F), it needs to do something — and blending innovative new designs with beefy ad budgets is a big part of that plan.
