The Hidden Tax of Digital Marketing

Google’s annual revenues are in the neighborhood of $160 billion dollars; roughly 70% comes from advertising. Facebook’s revenues are around $70 billion. Together, they represent about $180 billion dollars in annual advertising spend.

Many companies are spending a meaningful amount on on one or both platforms. Some companies spend 10%, 15%, 20% or even more of their revenue on these (and other) digital platforms.

Of course, if these ad-purchasing companies are going to be profitable, these advertising costs need to be passed on to their customers.

You could argue that these companies and their customers are receiving value. Companies are willing to pay (directly) for new customers and their customers are willing to pay (indirectly) to find goods and services efficiently.

If either part of that weren’t true, the market would breakdown (i.e., consumers would stop buying and companies would stop advertising).

But, what if there’s a different way?

How much better off would your customers be if you repurposed half your advertising budget towards product enhancements or better customer support? Might you need less advertising to find new customers with an improved product / experience?

As a marketer, it’s easy to fall into the trap of taking your product as a given and looking for ways to maximize your revenue. Hammers look for (and find) nails. The challenge is knowing when to step back and spend your money elsewhere for the biggest results.

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