x Abu Dhabi, UAEMonday 22 January 2018

Advertising just a slice of Apple's revenue pie

Apple annual ad spend is less than 1 per cent of its sales last year. While other electronics makers are similarly thrifty in marketing, the industry is beginning to ramp up its advertising, touting new types of products in new ways.

Apple spent US$933 million on global marketing efforts last year, which was up 35 per cent over 2010. Akio Kon/ Bloomberg via Getty Images
Apple spent US$933 million on global marketing efforts last year, which was up 35 per cent over 2010. Akio Kon/ Bloomberg via Getty Images

It has been years since Apple featured the hugely successful rock band U2 in its advertisements, yet the most valuable company in the world has continued finding ways to pour millions of dollars into advertising campaigns to hype its latest iPhones, iPads and iPods.

Make that hundreds of millions of dollars.

Last year, Apple spent US$933 million (Dh3.42 billion) on global marketing efforts, which was up 35 per cent over 2010 and nearly double the $501m it spent in 2009. Even so, some analysts say last year's figure is not especially high - relative to Apple's overall sales, that is.

"Apple spent less than 1 per cent of sales last year on advertising," an analysis conducted by YCharts, a financial data provider, found this summer. "And its sales growth has been far outpacing its advertising budget."

Apple is by no means alone. It turns out some of the biggest consumer electronics makers around the world spend similarly small fractions of their total sales on advertising.

Microsoft spent $1.6bn to $1.9bn on advertising during its three most recent fiscal years, which is only 2.2 per cent to 2.7 per cent of its sales from software, video-game consoles and other products and services.

The computer maker Dell invested $860m in its last fiscal year, amounting to a mere 1.3 per cent of its overall sales, according to data from YCharts.

Samsung is expected to more than double its advertising budget in the United States this year to promote its SIII smartphone, compared with the $142m it spent to hype all of its Galaxy products last year.

"The smaller players can't even compete, simply thinking from the marketing level, with some of these giants," says Dominique Bonte, a vice president and the group director at ABI Research, which analyses tech trends.

Neither industry groups, such as the Consumer Electronics Association, nor individual tech analysts track the total amount spent across all device makers. But sector experts say they have noticed a dramatic shift in the kinds of electronics dominating billboards, television slots and online advertising campaigns today compared with just a couple of years ago.

Manufacturers are allocating less money to tout "traditional" sub-sectors such as desktop computers and laptops, while fatter slices of the advertising budget pie are feeding the sales of smartphones, tablets and other hybrid devices, says Omar Kassim, the founder of JadoPado, an online retailer that mainly sells electronics.

"As product ranges and corresponding consumer tastes have shifted, marketing budgets are increasingly being allocated to products that are selling today," adds Mr Kassim.

Well-known companies in the GPS navigation sector, including Garmin and TomTom, seem to be pulling back from plugging portable navigation units in favour of apps that provide directions and can be downloaded to smartphones or tablet devices.

"Four or five years ago there was such a strong focus on personal navigation devices, with huge marketing budgets and a lot of spend with retailers to promote these products," says Mr Bonte. "We're seeing a very different environment. Clearly the smartphone is the big thing."

Growing sales of gadgets in the UAE, including a bumper week of sales during the Gitex Shoppper event this month in Dubai, have convinced many tech makers to increase the amount of money they spend here to launch and promote new devices.

Some companies have forged partnerships with online retailers to provide shoppers with new portals to their products. Hewlett-Packard, Dell, HTC, Microsoft and Apple are each advertised in "featured stores" on Souq.com, an e-commerce site in the Middle East.

Retailers in the UAE also acknowledge that much of their own marketing is done in conjunction with a manufacturer's financial support, which goes towards touting one brand over a competitor's.

"We're just getting started in terms of joint marketing efforts with our partners," says Mr Kassim. "However, we've seen keen willingness from partners to explore and execute such campaigns."

Part of this growing closeness between manufacturers and retailers may be driven by the perception that the Emirates could be "classified as an 'influencer' market, as what tends to do well in the UAE does well across the region", says Ashish Panjabi, the chief operating officer of Jacky's, an electronics retailer.

At the same time, manufacturers are becoming more savvy about exactly which products to market here in the Emirates and across the Middle East. This is thanks, in part, to local retailers who are quietly sharing slices of sales data behind the scenes.

ALshop.com, for one, has shared its order pages after making sales of Apple's iPhones, Research in Motion's BlackBerrys and some Samsung products. That way, manufacturers know what colours and model specifications are top performers and, ideally, that could help in marketing these devices in the UAE or lead to special pricing through device distributors.

"Authorised distributors have gotten data from us, which has been passed on to manufacturers," says Sheriff Rizwan, the chief executive and founder of ALshop.com.

"We do get data collection requests from our principal vendors, and they'll say, 'Do you have any partnerships with universities or schools because we'll work out special pricing if you have any orders in the pipeline?'" adds Mr Rizwan.

"All of these are coming from the big daddy."