Samsung leads the smartphone market in U.S. advertising spending
In the earlier articles of the series, we discussed how Samsung (SSNLF) is facing business risks in 2014, and one of the reasons for this challenge is the company’s declining operating margins. The main reason for this fall was the decline in the average selling price of Samsung’s smartphones and increasing marketing spending. Here, we’ll talk about Samsung’s marketing spending patterns in the most important market, the U.S. market.
According to a report from the Wall Street Journal quoting ad research and consulting firm Kantar Media as its source, Samsung once again led U.S. advertising spending in 2013 among all smartphone players, but Apple (AAPL) is closing in the gap. The report also mentioned that seven of the top U.S. smartphone makers spent a tad over $1.3 billion last year on ads across TV, print, online, radio, and outdoor venues—up 33% from 2012 spending of about $1 billion.
Apple is closing in on Samsung in advertising spending
According to the report, although Samsung topped U.S. advertising spending in 2013, the company actually spent less compared to 2012. Samsung spent $363 million in 2013—down from the $401 million it spent in 2012. Apple, on the other hand, increased its U.S. advertising spending from $333 million in 2012 to $351 million in 2013. Nokia (NOK) spent 15 times more in 2013 compared to 2012, after it announced the merger of its device and services business with Microsoft (MSFT). Motorola spent three times more, while BlackBerry (BBRY) spent two times more in 2013 compared to 2012.
Samsung is still unable to control its increasing marketing spending
In our earlier Market Realist series titled “Why Samsung forecasts falling profits for 1st quarter 2014,” we discussed how Samsung’s overall marketing spending increased from 45.4 trillion won in fiscal year 2012 to 54.2 trillion won in fiscal year 2013—an increase of about 20%. Despite reducing marketing spending in the U.S. from $401 in 2012 to $363 million in 2013, a reduction of about 10%, Samsung is unable to control its overall marketing expenses. To control its operating margins decline, Samsung will need to control its expenses not just in the U.S. market but in other parts of the world as well.