Samsung Breaks the Bank w/ $14B in Advertising, But is it Trying Too Hard?
December 4, 2013 10:47 AM
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Some advertising analysts say Samsung is overspending versus its rival Apple
Perhaps best known today for its Android smartphones, Samsung Electronics Comp., Ltd. (
) has become a
highly visible global brand
a new piece
"Samsung's marketing splurge doesn't always bring bang-for-buck",
discusses this trend and tends to take a highly critical view of Samsung's spending, its recent product launches, and its role as innovator in general.
I. Hey, Big Spender
It is unquestionable that Samsung is spending big when it comes to advertising and that its spending is growing fast. In 2012, AdAge
increased its U.S. advertising budget
more (percentage-wise) than any other company, growing it 58 percent.
In the U.S. advertising market Samsung only spent $597M USD for the year,
AdAge, a figure which appeared to narrowly miss the ad budget of archrival Apple (Apple spent $662M USD in the U.S.). However, AdAge also estimated that Samsung's
ad budget for the U.S. (which included smaller campaigns, blog advertising, etc.) was $882M USD, which indicated it might actually have actually outspent Apple in the region.
Samsung is taking advertising spending to new extremes. [Image Source:
And globally Samsung spent $4.3B USD in 2012, easily eclipsing the $1B USD Apple spent globally on ads.
Like Apple, Samsung has used multiple advertising agencies to spread a dvierse message. Samsung draws from more of a global pool of advertising giants
The Publicis Groupe
, based in Paris, France;
The Interpublic Group, Inc.
), based in New York City, New York; and
MDC Partners Inc.
(MDCA), a global agency with headquarters in Toronto, Ontario (Canada) and New York City, New York (U.S.).
Whereas Samsung's message is more globally driven, Apple's advertising campaign is primarily engineered by Californian firms like Media Arts Lab's TWBA. [Image Source: Archidose]
By contrast Apple uses mostly U.S. ad agencies, with the bulk of its help coming from agencies in its home state of California. The agencies used by Apple are large, well known agencies, but tend to be slightly smaller than the ones Samsung uses. Among its top partners are
, based out of Los Angeles, Calif.'s nonprofit
Media Arts Lab
, based in San Francisco, Calif.; and
, based out of Minneapolis, Minn.
Both companies focus the brunt of their advertising dollars on
their most profitable products
-- smartphones. In 2012 Apple spent $333M USD on advertising its iPhone, while Samsung spent $401M USD to
advertise its Galaxy line
of smartphones. As you notice, those numbers -- a dollar for dollar comparison on a per product/product line basis -- look less lopsided than the global advertising budgets. Indeed, Samsung may have outspent Apple in 2012, but it did so relatively narrowly in U.S. spending in markets where the pair compete.
Samsung and Apple were relatively close in U.S. mobile phone advertising in 2012.
[Image Source: WSJ/Kantar Media]
That's one place where the
piece comes off as biased and inaccurate, in that it fails to fully dig into not only
was spent, but
which product sectors
it was spent on.
Samsung is winding down a year of massive advertising spending. The Asian phonemaker's 2013 advertising makes its 2012 look downright frugal. This year Samsung is expected to pour $14.3B USD into global advertising. Apple's advertising is expected to under a tenth of that. While U.S. regional ad spending was close in 2012, Samsung is expected to jump way ahead in 2013 -- without making a major run on Apple's crown in brand image rankings.
Given what Samsung has received brand image-wise versus what it's paid for you can see where some advertising analysts have been critical of Samsung. However, it's important to not misstate, overstate, or misrepresent Samsung's 2012 efforts, which in many ways were much more modest and in line with Apple's in terms of tablet and smartphone industry advertising.
II. Market Gains
Another thing understated in the
piece is that the spending appears to be working, even if the return on investment is fair fodder for debate.
Samsung is currently the
top seller of smartphones
both globally (where it's led for some time now) and in the U.S. (where it recently moved ahead of Apple). It's in a solid second place in the tablet market (behind Apple). But as crucial a profit driver as the mobile market is to Samsung, it's important to recognize the company's growth and rising prominence in other sectors as well -- growth that is driven by heavy advertising.
There's a lot more to Samsung than just phones and tablets. Currently Samsung is the top seller of LCD TVs (ahead of LG Electronics, Inc. (
)), globally. It's in a solid second place in the tablet market (behind Apple). Samsung went from a relative bit player in the global appliances market, with a 2.3 percent market share in the U.S. in 2008 to a market share of 10.3 percent in 2013, good enough for fifth place. Globally, it is reportedly now the eighth largest appliance seller.
Market share by vendor, U.S. appliance market [Image Source: The Wall Street Journal]
that the spending is causative of the market share increase. U.S. leader Whirlpool Corp. (
) spent less than a tenth as much as Samsung in 2013. And between 2008 and 2013 its lead in the home appliance market has shrunk, as have the market share of other major U.S. appliance makers like General Electric Comp. (
Samsung's rising brand recognition is driven not just by spending on advertising its mobile offerings, but also by its heavy spending in other sectors, including the TV and appliance markets.
, compiled in November,
rated Samsung the ninth most valuable global brand in 2013 -- up from number twelve in
-- but behind Apple who held the title of most valuable brand in 2012 and 2013. Samsung's brand value grew 53 percent in 2013, faster than Apple's 20 percent growth, according to
Interbrand, another top market research firm,
Samsung in ninth place, and Apple in second for 2012. But it was more bearish on Samsung's gains, stating it gained "only" 40 percent in value, versus a 128 percent rise in value for Apple. Interbrand
Samsung in #8 (up one spot) in 2013, and Apple #1 (up one spot). Again, it diverged from
, indicating that Apple was the bigger winner, growing brand value by 28 percent, versus 20 percent for Samsung.
[Image Source: Interbrand]
didn't even mention the more favorable
brand numbers, instead only citing the more pro-Apple Interbrand analysis. With both sets of brand image numbers considered, the picture less black and white.
Either way you cut it, Apple is clearly getting top value for its dollar. But if you trust the
numbers Samsung is spending more and growing faster (than Apple). If you trust the Interbrand numbers Samsung is spending more and growing slower. But both reports agree that both Samsung and Apple are growing their brand image at a rapid rate, and spending large sums to do so compared to smaller competitors in the mobile electronics space.
III. Trying Too Hard?
Perhaps the harshest angle of attack in the
piece is its implications that Samsung is a follower and not an innovator. The author writes:
For a company long seen as a follower, this is now a big sell on it being an innovator.
And it backs up that claim, by further alleging that Samsung's advertising message is confused. It quotes Moon Ji-hun, head of Interbrand's South Korean office, who comments:
When your brand doesn't have a clear identity, as is the case with Samsung, to keep spending is probably the best strategy. But maintaining marketing spend at that level in the longer term wouldn't bring much more benefit. No one can beat Samsung in terms of (ad) presence, and I doubt whether keeping investing at this level is effective.
He points to the fact that Apple spends only 0.6 percent of its annual revenue on ad spending, where Samsung spends a whopping 5.4 percent of it.
While there's no denying those numbers, it's also important to consider that Samsung's growth targets are much more aggressive, where Apple's have looked increasingly conservative. This again comes back to understanding that there's more to Samsung than mobile. While the Apple versus Samsung angle is highly entertaining, the fact of the matter is that Apple and Samsung both enjoy mature dominant positions in the mobile market. Aside from the tablet market, Samsung's biggest growth potential lies in markets where it's been traditionally been weak and/or unprofitable -- the PC, television, and
While tech enthusiasts may have been aware of the Samsung brand ten years ago, the average consumer back then had nowhere near the strong opinions that
Back in 2003, Samsung was known for its feature phones and TVs in the U.S. market -- but not that much else. The whole "innovator" versus "follower" debate in the context of the average consumer arose more or less in 2010 when Apple sued Samsung. And the public only became very aware of the legal war in 2011-2012 as it became more heated and the bans/decisions started rolling in.
Back in 2007 consumers didn't have as passionate feelings about Samsung -- good or bad.
[Image Source: PhoneDog]
In other words, what to
is "a long time" is actually at most a couple years.
IV. Innovator vs. Follower -- The Eternal False Debate
Samsung's problem wasn't that it was being viewed as a follower. That's a strong opinion. Samsung's brand problem was that customers didn't have a strong opinion about it, good or bad. That's a primary reason why Samsung has for the last decade been steadily ramping up advertising spending -- it wanted customers to care.
And care they did. If anything, the criticism conveys that Samsung is a brand today that inspires strong passions, not the lukewarm acknowledgements of a decade past. To many Android fans Samsung
represents freedom and innovation
o Apple fans it's a "follower"
. Both sides could make convincing arguments, but at the end of the day it's a matter of opinion in many regards.
Apple may have accused Samsung of being a copycat, but its faced similar accusations itself.
[Image Source: Doyle]
What's worth noting is the passion in these opinions, passion Samsung bought with its ad spending and
legal war with Apple
. Even if Samsung has lost some crucial decisions in that legal war, convincing some that it was a "follower", in many ways that discussion has added value to the Samsung brand. As Oscar Wilde famously stated, "There is only one thing in life that is worse than being talked about, and that is not being talked about."
Microsoft Corp. (
) played this angle to perfection the 1980s. Many initially derided Windows as a "clone" of Mac OS (which was in turn a "clone" of Xerox Corp.'s (
) PARC GUI, in many regards). The Microsoft flames were further fanned by the high profile antitrust case of the late 1990s. These controversies helped Microsoft grow its brand image and become a talking point -- even if they did so via negativity.
Apple was widely accused of lifting its GUI design from Xerox. [Image Source: Ping.it]
It is inarguable that Samsung's '
Next Big Thing
,' and 'It's Time to Change' campaigns are focused on casting it as pioneer in the "innovator" versus "follower" debate. Some might assume that this is due to Samsung being
eager to offset the damage
recent lawsuit loss to Apple in federal court
But that perspective fails to acknowledge the value the case had for Samsung in some ways, in terms of publicity. It also fails to recognize that every firm -- including Apple -- wants to appear an innovator. Apple's new iPad Air ad, and Amazon.com, Inc.'s (
) cheeky parody both look to cast their products as unique innovations:
There will alway be some with a bone to pick with Samsung. Some might be Apple shareholders who would profit off Samsung's misfortune. Indeed, in its federal court loss against Samsung some of the jurors reportedly had family members that
were Apple shareholders
. Others might have a personal issue with Samsung or its partners -- for example, the jury foreman in the federal trial
had been sued by a company tied to Samsung
. Coincidentally he was accused of delivering misleading instructions, which helped guide the jury to a "guilty" verdict.
The same principle applies to Apple, who surely is less than beloved by Samsung's investors or disgruntled former employees. The bottom line is that brand image is a lot like popularity -- most want to be popular, but you'll always have some people who won't like you no matter what you do.
V. The Only Thing Worse Than Being Talked About is Not Being Talked About
piece fixates on the fact that Samsung is eager to change the “copycat” label leveled
. It points to Samsung's language and its advertising of features like its
hands-free user interface in the Android-powered Galaxy S IV
curved television displays
, an associate professor at the business school of
Seoul National University
, who comments:
Samsung's marketing is too much focused on projecting an image they aspire to: being innovative and ahead of the pack. They are failing to efficiently bridge the gap between the aspiration and how consumers actually respond to the campaign. It's got to be more aligned.
The Professor's criticism may be valid, but that's more of a knock on the advertising Samsung's partners gave it, not evidence of whether its products are viewed as "innovative" or "copycat" devices.
Apple wasn't afraid to "copy" Samsung and move to larger screen sizes when the market demanded it to.
Most major tech firms -- including both Apple and Samsung -- want customers to view them as innovators. And most major tech firms -- including Apple and Samsung -- have been
accused of being copycats
Samsung may end up having to
pay to license Apple's patents
. But then again Apple
has to pay to license Nokia
) patents. These deals boil down to a simple reality -- it is almost impossible to design a product that shares nothing with past products.
The South Korean company owns 30,000 patents in the U.S. and over 100,000 patents worldwide. Even assuming it only "invented" half of those and bought the rest via acquisitions, auctions, etc., you're still talking about one of the biggest patent portfolios in the market. It looks downright silly to say Samsung isn't innovative when you see these numbers.
Samsung owns over 100,000 patents worldwide.
misses the big picture -- that in the last decade and a half Apple and Samsung have both made the journey from companies that few cared to heartily praise, much less fixate on criticizing, to companies that are at the top of the market and at the center of
a firestorm of controversy
VI. Galaxy Gear Sales Echo the iPad
If anything Samsung's brand is helping it achieve some extraordinary things sales-wise. For example its heavy advertising of
the Galaxy Gear
, a wearable smartwatch device that received generally lukewarm reviews managed to drive major sales of the device.
Galaxy Gear Smartwatch
Critics -- like the
piece -- will be quick to chalk up the 800,000 units Samsung sold in two months was an epic failure. The device launched aside the Galaxy Note 3 Android phablet, and was billed as the perfect partner device. If less than one in five customers bought that pitch, the device was a massive failure, right?
That's a spectacularly silly argument because it misses the big picture. Samsung in two months moved nearly a million units of a product in a niche other companies had consistently failed to generate interest in. Further it managed to do so with a product that reviewers criticized as
under-featured and overpriced
. The Galaxy Gear is priced substantially higher in terms of up-front expenses (at $300 USD) than a discounted Note 3 with two-year contract ($170-200 USD with contract, $780 USD unlocked).
For a 800,000 customers in two months to buy in to a product that reviewers say isn't that great, which has a massive price tag, and which is in a niche that at present is "emerging" at best is a simply Herculean feat.
If anything, this should be viewed as a massive success, somewhat analogous to
Apple's 2010 iPad launch
. The iPad moved
"only" 1 million units
in its first month on the market -- pathetic by current standards.
At the time of its launch the iPad was in
a niche that had failed to excite
(tablet computers) and was
derided to the point parody
by some critics. The criticisms were similar -- it was under-featured (there weren't enough apps, it couldn't run Office, etc.) and overpriced.
A 2010 iPad parody; the iPad faced similar criticisms to the Galaxy Gear -- people thought it was redundant, underfeatured, and lacked apps. Yet Apple's marketing built it into a star product. [Image Source: Mulaz.org]
But the iPad's early sales proved critics wrong. Now Galaxy Gear sales are threatening to do the same, forcing critics to double down on their rhetoric.
VII. You Can't Argue With Success, But You Can Sure Try
In the end it'd be wise to consider all the numbers and analysis -- Interbrand's,
, and others -- taking any individual analyst's opinion with a grain of salt. But it's equally important to look at hard sales results in units moved and dollars made, not nebulous quantities in imaginary units like "brand value".
Samsung is spending a lot. But it is growing fast, and is pushing notable sales in product niches that were predicted to fail miserably like the "smartwatch" segment. Better still, it's become a household name.
That hasn't come cheap. But what makes it hard to say whether Samsung is getting good or bad value out of its spending is not only the fact that it's seen so much good come from the spending, but also simply because it's such a diverse company. Breaking down Apple's advertising return on interest is much more trivial as it only has a handful of major product lines, each of which have just a few major models.
Samsung today is a key player in multiple markets.
Samsung's product is
scattered across dozens of market spaces
, many of which Samsung is a serious competitor in. Advertising so many different things is inherently costlier and carries a far greater risk of being misunderstood by those who see the company in 2D, taking a narrow slice like "mobile" and basing their entire analysis around that slice.
Another factor making Samsung a hard target for analysis is its role as a global brand. Until a few months ago Apple smartphones outsold Samsung in the U.S. -- but Samsung outsold Apple by healthy margins overseas. Samsung's revenue is much spread out around the globe than Apple's, which remains concentrated most heavily in the U.S.
Samsung's sales are spread out across the globe, requiring a more diverse ad approach.
The need for global recognition is a critical and expensive advertising objective for Samsung. It's no coincidence that Samsung has been the official sponsor of all of the past eight Winter and Summer Olympics.
In addition to the Sochi Winter Olympics Samsung's latest campaign focuses on the mid-2014 World Cup in Brazil. Samsung has recruited the advertising rights to 11 of the world's top soccer (football) players, including Argentine striker Lionel Messi. In the new ads it shows them facing off in a soccer match against a collective of hostile aliens, saving the world with the help of Galaxy devices.
That kind of celebrity advertising power and sponsorship of such a massive event obviously isn't cheap. And in many regards it's representative of why Samsung's position is so unique. Samsung is a big spender on advertising. But for those who think it's a big loser, spending too much look at all the gains Samsung has made. You can't argue with success. And success is all too often inexorably tied to publicity.
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RE: Samsung reviews
12/4/2013 12:37:00 PM
Thanks for posting that link!
RE: Samsung reviews
12/4/2013 2:00:55 PM
RE: Samsung reviews
12/4/2013 2:08:46 PM
ROLFMAO. The new 3 wolf moon shirt?
Q: This more than I make in a year. How the heck can anyone afford this much for a TV?
I've heard of some people temporarily selling their kids into slavery; it seems to be working. If you have old money then this shouldn't be a...
| See all 5 answers
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it does. We have one in Myrtle Beach SC on the back of our jon boat and it works quite effectively
See all 3 answers
Q: Anybody who spends this much money on a TV is f****** stupid.
I am not stupid, I am investing. In 30 years, when I pay off this TV, we'll see who is f****** stupid.
RE: Samsung reviews
12/5/2013 8:32:10 AM
Actually I thought it would spin to create the 3D image without glasses, someone has shown this kind of technology before with a much smaller screen spinning at mad RPM!
"I mean, if you wanna break down someone's door, why don't you start with AT&T, for God sakes? They make your amazing phone unusable as a phone!" -- Jon Stewart on Apple and the iPhone
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