Apple vs. Microsoft Vista: The Ad Budget Wars

by: Erick Schonfeld November 24, 2008 | about stocks: AAPL / MSFT    

Erick Schonfeld

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When Apple (AAPL) started running the anti-Vista commercial (above) mocking Microsoft (MSFT) for spending $300 million on Vista’s own ad campaign instead of on fixing its problems, I called it hypocritical:

Apple’s advertising budget is also pretty massive. I mean, I see more Apple commercials on TV than ads for Barack Obama. Apple is on track to spend more than $3.5 billion on SG&A (selling, general, and administrative expenses) for its fiscal year that ended September 30. How much of that was spent on advertising? I don’t know, but 10 percent doesn’t seem unreasonable.

It turns out that I underestimated Apple’s advertising budget. Lindsay Blakely at Bnet (a former Business 2.0 reporter) found the actual numbers in a subsequent SEC filing. In its 2008 fiscal year that just ended last September, Apple spent a whopping $486 million on advertising. (In fiscal year 2007, it spent $467 million, and in fiscal year 2006 it spent $338 million).

Half a billion dollars on marketing. No wonder I think Apple products are so great.

Update: Microsoft spends more on advertising across all of its combined businesses than Apple does, but its Windows business is what competes most directly with Apple. Microsoft’s total advertising budget across all of its businesses, including Windows, Office, Xbox, and all the enterprise stuff, was the following (from the 10K): “Advertising expense was $1.2 billion, $1.3 billion, and $1.2 billion in fiscal years 2008, 2007, and 2006, respectively.”

Microsoft’s fiscal year ends in June, so these numbers do not reflect the $300 million Vista campaign. But that would have eaten up 25 percent of Microsoft’s entire ad budget for any of the previous three years.

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This article has 15 comments:

  •  
    Nov 24 11:22 AM
    ...and of course you are conveniently forgetting that the ad spend is across all the Apple product line too. That is not 486 million on "get a mac" ads - that's probably quite a lot on iPhone ads that seem to be on nearly every prime time ad break.

    Microsoft were fair game in that they plied the press with release saying exactly how much they were spending. The whole point of the marketing buzz was how much they were putting into the ads.
    Reply | Link to Comment
  •  
    Nov 24 11:25 AM
    It isn't a matter of thinking that Apple products are great due to the advertising. They are superior in overall build quality and most importantly the OS. I tell folks, if their time isn't valuable to them then buy Windows, if it is then buy Apple!
    Reply | Link to Comment
  •  
    Nov 24 11:25 AM
    Apple is only hypocritical if people are clamoring for them to fix a bad product, but they spend the money on advertising instead.

    Microsoft is being treated unfairly if people are clamoring for them to fix a bad product, but they spend the money on advertising instead.

    The only way a large advertising campaign is effective is if the message is backed up by reality.

    Draw your own conclusions.
    Reply | Link to Comment
  •  
    Nov 24 12:02 PM
    Yet another blogger throwing around words they do not understand. Apple's products are by no means perfect. However, when a new product or update has defects they are usually pretty quick to provide a fix. The ad is not about the amount spent on advertising alone.

    Microsoft should spend the $300 million on sustaining to fix vista defects. I'm sure they are spending quite a bit on it already, but the extra $300 million wouldn't hurt.

    I suspect you know all of this and are just pulling a Dvorak.

    www.scripting.com/2006...
    Reply | Link to Comment
  •  
    Nov 24 12:19 PM
    For several years I did database app programming and was tied into DOS and then Windows (95, 98, etc.) and while I liked my database platform (Paradox for DOS, Access for Windows) I became increasingly frustrated with the OS and its frequent crashing, usually resulting in having to rewrite at least some code. It seemed I couldn't back up frequently enough! When I was finishing the app, I read an announcement that Apple was coming out with OS X and that's when I switched to Mac. Oh happy day!!! My Windows nightmares ended ... Mac just did what it was supposed to do and did it well. MS can't even create a decent ad (in my opinion)!
    Reply | Link to Comment
  •  
    Nov 24 12:46 PM
    No matter how much MS spends on their current campaign, it doesn't fix their underlying problems. And quite frankly, their ad campaign is horrible. It says nothing about the brand, the product, differentiation, value proposition, any of the fundamentals of great (or even good) marketing. Instead it shows a bunch of walmart types talking about how they are pc's... wow.... "got a run right out and get me one a 'dem things"...
    Reply | Link to Comment
  •  
    Nov 24 12:49 PM
    Erick: "When Apple (AAPL) started running the anti-Vista commercial (above) mocking Microsoft (MSFT) for spending $300 million on Vista’s own ad campaign instead of on fixing its problems, I called it hypocritical: Apple’s advertising budget is also pretty massive. "

    ______________________...
    It seems apparent that Apple's commercial is making the point that instead of spending a lot of advertising money designed to sell Vista, that Microsoft should first concentrate on fixing Vista. So they are indirectly saying that Vista needs fixing and that Microsoft is advertising defective products.

    Your comments to the effect that the message is "hypocritical&quo... because Apple spends a similar amount of money advertising as Microsoft has nothing to do with the commercials content.

    Do consumers have issues with Microsoft Vista? Well, searching Google with "Vista Compatible problem" returns over 19 million pages. I have seen a lot of press about issues with Vista. A lot of that press seems to be related to Microsoft setting false expectations about what levels of hardware a person needs to be able to use all of the advanced Vista Features...


    Reply | Link to Comment
  •  
    Nov 24 01:08 PM
    Sorry, you're going to have to work a little harder next time. Simply putting the words 'Apple' and 'Microsoft Vista' in your headline doesn't mean that you have a thoughtful or interesting article. None of your points make any sense. Why this comparison? Why not compare their freight and shipping budget or their HR budgets? They would tell you, or not tell you, just as much about reality.

    You approach Savitzian heights with this silly, vaguely anti-Apple conclusion. Please do better.
    Reply | Link to Comment
  •  
    Nov 24 01:09 PM
    I dont think that hypocrisy is a useful term. Even if Apple were being 'hypocritical', their ads are superior by far, so at least the cash is being spent well.
    Apple's products seem to work well, and are increasingly popular, so I cant see a problem there, either.

    Microsoft has bad ads (very bad) and a legacy OS that is increasingly bloated and dysfunctional.

    Apple therefore is NOT guilty of hypocrisy; but Microsoft still has bad product and bad advertising.
    Reply | Link to Comment
  •  
    Nov 24 02:16 PM




    wake up kids, apple is a huge soul sucking corp just like dell msft citi google gm.

    yes apple make nice things, but so do everyone else , it is all slices of the same pie.
    Reply | Link to Comment
  •  
    Nov 24 03:31 PM
    Yes, Microsoft and Apple are involved on a "Budget Ad Wars", and if you think that there is people dying of hunger in Africa, Central America, etc... well those numbers and ads don´t look that cool.

    From a realistic or corporate point of view:

    Not only Apple seems to create better products than Microsoft. From an advertising point of view, their ads are as good as their products. Microsoft on the other side: Jerry Seinfeld with Bill Gates? and then the whole thing with "I am a PC" with a bunch of cool guys and Deepak Chopra. I just don´t get it. I don´t think Microsoft administration staff is as competitive as Apple, from an IT point of view and from a Marketing point of view.

    From a non-realistic point of view:

    I will say it again, seeing the numbers, it makes me think about how markets behaves, if we are creating a better world as humans, etc. I know these companies have their social responsibility programs (which is great), but the numbers just make me think, what can I say?
    Reply | Link to Comment
  •  
    Nov 24 10:36 PM
    If throwing money at Windows is all it would take to fix its problems, it would have been debugged years ago. Vista has been labored over for ages, at a cost of billions. Its problems go too deep for "fixing"--it... built on sand, due to deliberate, short-sighted decisions (which others warned against) back in the early 90s.

    What MS's leadership should have done around 2000 was to set up a skunkworks to create an advanced, alternative OS for people frustrated with Windows, to prevent them from defecting to Apple or Linux (or maybe a rumored OS-in-the-works from Google). This OS would have been incompatible with Windows--but that's the price that switchers are willing to pay anyway.

    The most likely reason this obvious backstop project wasn't launched is that it would have implied that the boy wonder in charge had made a big boo-boo.
    Reply | Link to Comment
  •  
    Nov 25 12:42 AM
    Someone needs to take a class in logic.

    It's only hypocritical if Apple spends that money on advertising while not spending that money on fixing any OS bugs.
    Reply | Link to Comment
  •  
    Nov 25 03:54 AM
    This post is incredibly inane. Does Erick Schonfeld actually thinks Apple spends $500 million solely on Mac marketing? Either he is dumb or dumber.

    Last time I check, Apple does quite a lot of advertising for iPods and iPhone. In fact, I say way more print, TV, and web advertising for iPhone than any other product Apple is selling these days.

    Yet somehow Erick Schonfeld has "insight" to compare Apple's total ad spend to Microsoft $300 spend for Windows alone. What an asshat analysis.

    BTW, Erick Schonfeld, do you realize Apple's revenue in fiscal 2008 was about $32 BILLION? For 1/3 of the total ad spend apparently, Apple makes 1/2 the annual revenues Microsoft does.

    The fact that you are posting about financial matters for Seeking Alpha makes this post a flaming embarrassment to this site.

    What an utter embarrassment. But that's why you get when you're aim is to be snarky first, smart last.
    Reply | Link to Comment
  •  
    Nov 25 04:31 PM
    I like the Apple ads, even though I'm not an Apple user.

    I dislike Microsoft ads because they're always unreal, untrue, telling over-hyped lies.

    The best things in life ARE free ;-)
    Reply | Link to Comment
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