Published October 04, 2012
NEW YORK/SAN FRANCISCO – Amazon.com Inc (AMZN) CEO and founder Jeff Bezos, who quipped at a shareholder meeting a few years ago that "advertising is the price you pay for having an unremarkable product," is eating those words.
Three years on, as the company moves aggressively into the mobile computing business with its Kindle tablets and ereaders, Amazon has already spent $34 million on TV advertising for the Kindle in the first half of the year, according to Kantar Media, and there's more to come.
Indeed, in the consumer technology business, where billions of dollars are poured into marketing, great products go only halfway towards winning market share.
Take Apple Inc, for example. Perceived as a company that has triumphed with exceptional technology, it has long been the pace-setter on marketing, too, spending some $1.5 billion on iPhone and iPad advertising since their introduction.
Now Samsung Electronics Co Ltd, Amazon, Microsoft Corp and other tablet and smartphone makers are stepping up with big spending on TV spots, print ads, guerilla marketing stunts and over-the-top launch events.
As the holiday shopping season approaches, this fall's marketing contest promises to be intense - and creative.
The marketing is "speeding up at a rapid rate," said David Droga, founder and creative chairman of advertising agency Droga5. "Everyone is trying to stand out."
In New York City and Chicago, mysterious graffiti with the word "surface" appeared on building walls a few months ago - a tease for Microsoft's upcoming Surface tablets, which are designed to showcase its new Windows 8 operating system. (The company wouldn't confirm that it was behind the sketches.)
TAKING ON APPLE
And embattled Research in Motion Ltd is playing the prankster. Earlier this summer, the Blackberry maker sent a big black bus to an Apple store in Sydney, where customers were waiting in line, and deposited people with protest signs that said: "Wake up!"
Apple is the envy of other tech companies for the appeal of its iPhones and iPads with consumers, a fact that has helped augment the greater smartphone and tablet market.
Samsung has also poked fun at Apple's fiercely loyal fan base with TV ads suggesting that those queuing for the latest iPhone were dupes. The widely aired commercial lured more than 16 million views on YouTube and was the most discussed ad on Twitter during the week of its launch, according to social media monitor Bluefin.
Apple's new "physics" ad for the iPhone 5, in contrast, has had only a million YouTube views.
And Samsung's set for more of the same. The company has boosted spending on TV commercials for its Galaxy smartphone - the key rival to Apple's iPhone - to almost $80 million in the first half of this year, outpacing its ad expenditure in all of 2011, according to data from Kantar Media.
"We are seeing most smartphones essentially becoming 4-inch pieces of glass and metal," said Mark Himmelsbach, head of digital strategy for BBDO North America, which creates campaigns for brands including AT&T Inc and Hewlett Packard Co. "It is important now to tell an interesting and compelling brand story" to differentiate one product from another, he said.
AD SPENDING SOARS
Advertising spending on smartphones and tablets has more than doubled to nearly $650 million annually over the past five years, according to Enid Maran, senior vice president of tech and telecom advertiser solutions at Nielsen.
And that doesn't count the money spent on events, public relations campaigns and ads run by wireless carriers that often co-market specific devices.
Google Inc, Microsoft, Amazon and Samsung declined to comment on how much money they direct towards advertising.
Ironically, "old media" remain the vehicles of choice for touting new media devices.
Sixty percent of advertising expenditure on smartphones went to television from 2011 to the second quarter of 2012, according to Michael Winter, managing director for digital strategy at media buying firm PhD Network. Almost 30 percent went to print and only 9 percent went to the Web.
Amazon teased its latest Kindle Fire tablet in a TV ad during the kick-off of the National Football League season, a day before its actual launch.
"We determined TV was an important part of the mix," Neil Lindsay, vice president of marketing of Amazon's Kindle business said at a conference in April.
Those efforts may be paying off for the company.
Robert Passikoff, founder and president of brand research firm Brand Keys, said Amazon is gaining some traction with its efforts to be known for content - and the devices that make it accessible - rather than just for online shopping.
Changing brand perception, though, is more challenging.
Google, for example, is a strong brand in Web search but not in mobile computing, Passikoff said. People do not associate Google with Android, the leading mobile operating software, and that could be a hurdle for its nascent hardware business.
"We don't get mentions with Google about smartphones, or tablets or computers," he said, referring to Brand Keys' surveys.
Google has promoted its new Nexus 7 tablet on television and in print. The search giant also used its famously sparse Google.com search page to advertise the $199 device.
RIM, meanwhile, faces a tough marketing battle as it tries to reverse its fortune. The company's new marketing chief, Frank Boulben, said it will begin by slowly revealing features of its BB10 smartphone - slated to be released next year - to media and celebrities, and follow that with Web videos.
"The real-time marketing will ramp up until the moment we launch and the device is actually available in the stores," Boulben said. "And then we will start marketing jointly with the carriers - TV campaign, outdoor (ads)."
Meanwhile, Apple's TV campaigns are kicking in.
As the company's marketing head, Phil Schiller, discussed in his testimony in a recent Apple/Samsung patent lawsuit, Apple initially relies on the media to create a buzz for its products, and rolls out ads as the initial excitement fades.
In addition to TV and print, the company also spends heavily on product placement on TV shows and movies, Schiller said.
According to court documents, Apple has spent close to $1 billion in advertising the iPhone since its debut five years ago and another $457 million for the two-year-old iPad. The media coverage for Apple's iPhone and iPad, on the other hand, has been priceless.
(Editing by Jonathan Weber and Bernadette Baum)