How Microsoft Advertises

Recognizing that many customers—particularly consumers—do not time their software purchases to Microsoft’s product launch schedule, Microsoft is allocating a significant portion of its advertising budget to continuous “image” advertising, in hopes of influencing customer opinions well before they begin the buying process. To create such campaigns, Microsoft relies heavily on market research and customer feedback, providing opportunities for partners who can provide these services. The effectiveness of Microsoft’s advertising may also help—or hinder—partners who resell Microsoft software.

US$1.2 Billion per Year

At US$1.2 billion per year, or nearly 2% of revenue, Microsoft’s advertising budget is fairly large for a technology company of its size but has declined (as a percentage of revenue) from a peak of 5% in 2000 and 2001.

In comparison, Apple spent US$486 million or about 1.5% of its annual revenue on advertising in the year ended Sept. 30, 2008, and IBM spent US$1.26 billion or about 1.2% of its annual revenue on advertising and promotions in calendar year 2008. None of these companies placed in the top 10 U.S. advertisers in 2008, and companies in some other industries spend much more on advertising: Procter and Gamble spent US$8.67 billion or 10.4% of its revenue on advertising in the fiscal year ended June 30, 2008, and telecommunications provider Verizon spent US$2.75 billion or 2.8% of revenue on advertising in calendar year 2008. (These numbers come from company financial filings and may not be exact comparisons, as each company might count slightly different expenses in this category.)