Advertising as an economic-growth engine
Over the past 30 years, many studies have demonstrated that a country’s GDP strongly influences the amount that companies spend on advertising. But few researchers have investigated the opposite phenomenon—whether a company’s decision to increase its media budget can produce widespread economic benefits. There is an even greater gap where digital media, the newest form of advertising, is concerned. In addition to having little information on the macroeconomic benefits of digital media, most companies have yet to quantify how this form of advertising has influenced their sales.
To address these knowledge gaps, the authors of this report conducted a macroeconomic analysis of the benefits of advertising on G20 countries, as well as a microeconomic analysis of digital media’s impact on 440 Belgian companies. The results revealed that advertising fueled about 15 percent of growth in GDP for the major G20 economies over the past decade by generating new business. While some companies launched unsuccessful media campaigns and did not recoup their costs, such failures were outweighed by the companies with strong campaigns that increased sales, attracted new customers, or improved margins. On a microeconomic level, introducing digital media to the advertising mix helped companies increase their revenues, market share, and profit margins to a greater degree than traditional advertising alone. (Notably, digital media produced its effect by enhancing the impact of print and broadcast ads, rather than by replacing them.) Digital media also turbocharged advertising’s effect at the macroeconomic level, provided that companies channeled the additional revenue that it generated into job creation. Given these findings, companies and governments should not view advertising only as a business expense; it is also an investment that promotes macroeconomic and microeconomic growth.
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