Is Advertising a "Tax for Being Unremarkable"?

This comes up every few months. Robert Stephens, founder of Geek Squad said it. Seth Godin made it popular.

Lately it’s come up in the context of Tesla. “Look! They don’t spend a penny on advertising!” Hmm, okay, sure.

And it comes up in tech, where advertising is often seen as a failure of product design. (“Great product sells itself,” the techvangelists say.)

If this is true, why is Amazon — clearly a pretty remarkable company, a TECH company, and seemingly ubiquitous — why is it the largest advertiser in the US today, spending $16.9Bn last year on ads?

Well, first off, Amazon has 41% market share in the US. So they still have lots of room to grow. Advertising helps them win over the 60% who don’t buy on Amazon yet.

Second, Amazon comes out with new stuff all the time that even hard-core customers haven't heard about. Prime. Kindle. Echo. Fresh. Fashion. Prime Day. Etc.

Third, there’s competition: Wayfair, Walmart, eBay, etc. Ads help Amazon fight off competition.

And fourth, brands aren’t just about function. Sometimes they’re also about meaning & culture-making & storytelling. Maybe Amazon wants to help “steer the narrative” about their brand.

See, memories are fragile. And people mostly don’t give a rat’s ass about brands unless they have to. Ads are a good way to refresh those fragile memories.

In Amazon’s case, is it working? I’d guess that such a data-driven tech company wouldn’t up their ad spend by 50% last year if it wasn’t. And brand science tells us that revenue growth tracks pretty tightly with share of voice.

So next time you hear that lovely phrase about ads being a tax on unremarkable products, just smile and nod and say, “Bless your heart.”

(PS: Seth Godin advertised the sh*t out of his altMBA. FWIW.)