Friday, May 25, 2018
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Commentary

What would life be without advertising?

With the ad summit Pilipinas 2018 taking center stage in Subic this week to discuss whether the success of a brand depends on return-on-investment profits alone, or there are alternative measurements like return on innovation or return on ideas, maybe it’s time for us consumers to ask if advertising is still relevant in our daily lives.

In fact, advertising is everywhere. It is impossible to escape beer and pizza ads on TV, shampoo ads on billboards, car ads in newspapers, even Grab and air-conditioner repair ads on Facebook. Based on extrapolated figures of Kantar Media and Marketing Interactive, the total adspend last year by the 50-plus members of the Association of Accredited Advertising Agencies of the Philippines amounted to P401.9 billion. That’s about 1 percent of our GDP, and that’s just across the three media of TV, radio and print, not yet counting the increasing adspend in online and digital media.

Advertising media placements are expensive. The cost of a 30-second commercial on prime-time TV is about P1.5 million, while a full-page, full-color ad in any of the major mainstream print media is about P400,000 including the value-added tax.

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In 2017, TV accounted for the lion’s share of 79.7 percent, followed by radio at 17.2 percent and print at 3.1 percent. Unilever retained its top spender position, followed by Procter and Gamble and Colgate Palmolive. The other multibillion-peso advertisers are United Laboratories, Unilever RFM Ice Cream, Jollibee Food Corp., Monde Nissin Corp., ACS Manufacturing, and Mead Johnson. Are these huge ad expenditures beneficial to us consumers and the national economy as a whole? Can we possibly live without advertising?

Marketing and economics experts have been debating this topic for some time now. Some argue that ads are just “hidden persuaders” which make people buy things they don’t really need. But the majority believe that ads are ultimately beneficial because they give people more information on products, which boost the competition, and which result in reduced prices across the board. Advertising makes purchasing easier for consumers. It provides fact sheets on the place of availability of goods, the prices, points of superiority, and other relative merits.

When I was teaching PR and advertising in college, I’d kid my students that without advertising, the most effective way to sell a brand of refrigerator is to carry one on your back and demonstrate its benefits and attributes to every housewife in the neighborhood. Otherwise, the really effective way to reach the greatest number of housewives is to place a 30-second commercial on TV.

Later I’d explain that advertisers actually pay for the content of our favorite TV and radio program, as well as the news and features we read in newspapers and magazines. Our favorite PBA teams, such as San Miguel, TNT, and Ginebra, are walking advertisements in themselves. The companies that sponsor these teams pay millions of pesos in advertising revenue for every PBA season.

Ezra Klein of the Washington Post wrote: “Advertising is the great subsidizer of the press, entertainment, and online services. There is probably no single industry—not newspapers nor search engines nor anything else—that has done as much to advance the storehouse of accessible human knowledge in the 20th century as advertisers.”

According to Klein, media economists have found that advertising has traditionally provided about 70-80 percent of support for newspapers and magazines, and advertising or underwriting has entirely paid for broadcast TV and radio. Similarly, the vast majority of online sites and social media services we enjoy today are almost completely ad-supported.

Without advertising we would have to pay for the posts (fake or otherwise) that we derive from Facebook. Per Statista, the global Facebook advertising revenue in 2017 amounted to $39.9 billion. Previous studies show that advertising fueled about 15 percent of growth in GDP for the major developed economies over the past decade. On a microeconomic level, introducing digital media to the advertising mix has helped local companies increase their revenues, market share, and profit margins to a greater degree than traditional advertising alone. Notably, digital media produced its effect by enhancing the impact of print and broadcast ads, rather than by replacing them.

Statistical evidence has shown that advertising contributes to a country’s GDP and that digital media boosts advertising’s typical contribution to performance for both individual companies and the economy as a whole. Advertising is a valuable intangible investment and companies are willing to allocate more of their budget to this area. According to recent estimates by ZenithOptimedia, adspend on above-the-line advertising that is directed to mass audiences, plus below-the-line promotional media for niche audiences—such as direct-to-consumer mailings, e-mail marketing, coupons and product samples—have easily exceeded $1 trillion, or more than 2 percent of GDP in 2017.

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So the next time you want to skip the ads on your iPhone, remember that without advertising you probably would have no iPhone in the first place.

Charlie A. Agatep (charlie.agatep@ grupoagatep.com) is chair and CEO of Grupo Agatep.

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TAGS: ad summit Pilipinas 2018, Advertising, Commentary
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