The high cost of advertising

Marketing practices have become a major nuisance, they creep into what we are doing, cost huge money, generate fortunes, and we pay for it all.

The narrative is that they bring us their messages to serve us better. And if we are watching a movie, it is interrupted with some soapy message, together with the suggestion that they are “offering us” this film free of charge. None of this is free, of course, as the costs are included in the products we buy. We are paying them to put the message in the media. Do we need this? The basic economics of it all is that paying directly to whoever is producing cultural products would allow us to have better culture at much lower costs.

In France, households pay a fee of 138 euros a year, to have excellent advertising-free TV programs, cultural events, concerts, news and so many necessary products of the communication world. In England, the fee corresponds to 180 euros. We have BBC and other first-class culture, information and entertainment. But Macron is suggesting he will eliminate de fee, called redevance¸ to include the costs in the budget. Boris Johnson scheduled the elimination of funding starting in 2027. What this means is that culture and communication will depend much more on the ups and downs of budgeting, but most of all that what remains of public-generated culture will be in the hands of corporations, through advertising.

The attention-grabbing industry has become a giant. Since we spend a good part of our lives watching some kind of screen, holding us by the eyeballs has become a hugely efficient and profitable industry. First of all, it has expanded consumerism to a pathological level, the last thing we need in this explosive environmental slow-motion catastrophe. In advertising, we are not informed about products and services, we are to be enchanted by smiling beautiful young women, soft-spoken voices full of intimacy, or screaming voices to alert us of an instantaneous opportunity we cannot miss, but most of all through ceaseless repetitions, again, and again and again, as if we were morons that did not get the message. And we are paying for it.

The corporations insist they must show their products, and spread the word. This is legitimate, but I do not need Monroe informing me hundreds of times on the radio that they are the first to produce shock absorbers, interrupting a concert. If I need shock absorbers, I will search on the internet, or better consult with my mechanic. And he does not need this kind of advertising, he will consult specialized publications. Advertising and information on products have separated. The name of a brand is hammered ceaselessly through different media, and costly research will inform the advertising campaigns how the brand recognition is rising. But do we need this?

Does it improve sales? Well, if a beer brand invests heavily in advertising, with spots showing very happy males drinking beer, getting excited on some game showing on TV, with charming female legs moving about, the brand will sell more. But the other brands will resort to a counter-offensive so as not to lose market share, and the result is a cacophony, huge costs that are included in the beer price we pay, and more commercial wars ahead. I like watching football. Do I need these stupid ads, the interruptions, and the silly way of life that is implied in the commercials? Well, they say it’s free!

In the US, Amazon, Google and Facebook control 50% of the advertising business, around 250 billion dollars. “The U.S. is home to some of the biggest advertising spenders in the world. Despite a decline due to the COVID-19 pandemic, U.S. advertising spend was worth just over $225 billion in 2020. The Big Tech ad triopoly made roughly $120 billion of this and is taking up more market share every year. One reason for this is the industry’s move towards digital ads, which now make up almost two-thirds of all ad spending. Big Tech stocks like Google and Facebook are well-known pure plays on the advertising space. However, Amazon’s inclusion may come as a surprise. Typically known for their eCommerce business, Amazon now also makes over $16 billion in ad revenue each year.”¹ Yes, we pay for all this, every time we purchase practically any product. We pay them to interrupt what we are doing or watching, to tell us what we should buy, or to convince us that we could not live without it.

On the world scale, Facebook (Meta) reaches 2.9 billion users, and 97.5% of its revenue comes from advertising. Zuckerberg’s fortune is included in all the extra prices we pay.² And the targeted advertisements that penetrate every activity are simply effective: this is not information on products and services, it is manipulation. “Facebook, Google, Apple and Amazon variously avoid tax, crush the competition and violate privacy, the complaints go. Their inscrutable algorithms determine what we see and what we know, shape opinions, narrow world views and even subvert the democratic order that spawned them. In 2018, a “techlash” is in full flow. There is broad agreement that something must be done about big tech…Whether it is Amazon’s “customers who bought this also bought” function or the eye-catching red or orange “something new” dots on your smartphone app icons, big tech products are not just good, but subtly designed to control us, even to addict us – to grab us by the eyeballs and hold us there. The result is the attention economy, whose currency is data.”³

How much marketing do we pay when buying a product? “Johnson & Johnson is another world-famous brand that manufactures medicines, hygiene products and medical equipment. Today it is one of the most competitive markets. Therefore, in 2017, the company spent 27.7% of its revenue on marketing.”⁴ This is huge. As with the beer example we used above, all the other manufacturers must follow, in order not to lose market share. We pay for a marketing war, with idiotic messages repeated by the thousands, a cost for everybody. They could use this money for research, and cheaper products. This is about health, and what is needed is better information, not marketing. Education is going down the same path: “The educational sector also does not live without marketing. Today we all know about Harvard, Oxford or Yale, not only because of their history or the quality of their education. First of all, all these institutions invest in their own promotion.”

Financial results become central. Strayer Education (Strategic Education Inc.) spent 18.2% of its revenue on advertising in 2017. It holds the fifth largest amount of US student loan debt. According to Wikipedia information, “in 2021, Strategic Education’s top shareholders are BlackRock, T.Rowe Price, and Vanguard Group”. BlackRock and Vanguard Group manage 17 trillion dollars. US GDP is 21 trillion, and Biden’s budget is six trillion. Shareholder-oriented education, as well as student debt. Just business, but with the power of modern platforms, and radically new outreach power.

Enrique Dans goes straight to the point: “Why would anybody want to ban a type of advertising that has given rise to a billion-dollar industry? Fundamentally, because its premises are wrong, abusive and unsustainable. By now, anybody who uses the internet that the idea of monitoring everything we do online so that our activities can be analyzed in order to bombard us with hyper-segmented advertising knows this is a bad idea.”⁵

According to UNCTAD Digital Economy Report 2021, “these companies have a competitive data advantage resulting from their platform component, but they are no longer just digital platforms. They have become global digital corporations with planetary reach; huge financial, market and technology power. And control over large swathes of data about their users.” (p.10) We must “recognize that current global institutions were built for a different world, that the new digital world is dominated by intangibles, and that new governance structures are needed.”(p.18)⁶

The attention industry is booming. Do we need this? It does generate jobs, but jobs should be created to generate useful goods and services, not adding costs to them. We have created a culture where the act of purchasing is supposed to create the reward, more than the product. Well, this does generate “garage sales”. The fact is I do not need to be assaulted with messages about things I do not need, while the things I do need I do not need them to be advertised. It is as simple as that. And the huge money we spend on advertising drain the creative capacity of so many professionals who could be producing rich culture and entertainment for all, rather than serving corporations. A huge waste of talent.

The Merehead paper quoted above sums it up: “Today, it simply does not make sense to allocate huge billion-dollar budgets. Even market leaders, from The Coca-Cola Company to Nike, have cut their advertising costs. Why? The consumer began to be interested in the product on their own. He does not need to drive into the head that this or that company exists. In search of alternatives, he still finds out about some opportunities.” A classic publication on the subject is Juliet Schor’s The Overspent American: why we want what we don’t need (1998): “Being poor, or devoid of possessions, does greatly impair one’s well-being, but beyond a certain point, having more stuff doesn’t seem to help. A fivefold increase in Japan’s average income made its citizens no better off in terms of happiness. The postwar threefold increase in American incomes had the same result. On average, we’re long past the point where additional income, or consumption, yields much psychic benefit.”(p.165) Already at the time of her writing, before the present huge personal information trading industry, we were paying a fortune: “Ad expenditures have skyrocketed in recent years and now stand at more than $2,000 per family. These expenditures are fully subsidized by taxpayers: advertising costs are deductible from corporate profits.”⁷

That was before the full digital revolution and the world-scale corporations with their algorithms. The Electronic Frontier Foundation brings us to this new world: “Tech companies earn staggering profits by targeting ads to us based on our online behavior. This incentivizes all online actors to collect as much of our behavioral information as possible, and then sell it to ad tech companies and the data brokers that service them. This pervasive online behavioral surveillance apparatus turns our lives into open books—every mouse click and screen swipe can be tracked and then disseminated throughout the vast ad tech ecosystem. Sometimes this system is called “online behavioral advertising.”⁸ The system is in the hands of a handful of corporations: in the US, 78,6% is in the hands of 10 top digital publishers and platforms, and the proportion is getting higher. “Digital ad revenue in the U.S. jumped 35% to $189 billion last year as marketers chased consumers spending ever more time on online media and shopping, according to a new report from the Interactive Advertising Bureau and PricewaterhouseCoopers LLP.”⁹

Quoting Enrique Dans again: “And yet, for the simple reason that it was something new and still not adequately regulated, for more than a decade we have been accepting and taking as a characteristic of the online world that very advertising model, which has generated huge amounts of money for the companies that sell advertising, but hasn’t translated into more sales. The result is that brands waste their advertising budgets, we feel spied on, and all so that a few companies and intermediaries that dominate this market can make a fortune.” It costs us a lot, we are not happier with it, and sustainability is going down the drain.

A few years ago, as I turned 70, I received an ad from a burial company, offering me their services, with a description of a beautiful graveyard and accompaniments. Professional job, with soft music, sightseeing and all. It was not just in time, by now they certainly also have my health information and would be more precise. I was amused, but my kids, who saw the ad, were sad with the idea the ad group conveyed as to my future. Do we really need this? This is my life, keep off, let me do my choices, and chose my information. How long will we accept anything in the name of market freedom?