Is Advertising Good for the Economy Essay

Nowadays, in business world, advertising is considered a powerful tool for competition. Consumers can get useful information from advertisements and can choose products which best suits them according to their needs. Advertising play a significant role in the US economy it assists American economy to function smoothly. Furthermore, it keeps prices low and helps the entry of new organizations in domestic and global market depends on the organization’s business. Advertising especially in the US, is considered as an economic work horse which has performed colossal feats with little credit. However, the work horse often pocks his nose in places where he is not supposed to. Unfortunately, according to O’Connor, â€Å"Unless product meanings change in the populations, advertisers continue to associate the same values with the same products†. (O’Connor, 1996) At present, the US market has become a highly mobile consumer-centric society. In this speedy market everyday millions of dollars exchange through internet and by other sources. The American economy has been conquered by retail and service business industry, and in both industries ads play a fundamental role in boosting their products and services demand. In this regard, any retailing or service business industry if desired to get succeed, both must advertise their product for consumers about product quality, cost and some useful information. In this context, outdoor signs have experienced as the most rapid communicative and cost effective tool. In the year 2004, the economy of Missouri generated approximately 108 billions dollars. According to a research conducted by Davidson revealed the facts that in the year 2004, the aggregate economic activity produced by ads, which includes direct expenditure, goods provider spending and inter-organization activity generated approximately twenty percent of the nation’s 548 billion dollar economic activity and also provided around 429,700 jobs, or fifteen percent of the nation’s workforce of 2. 9 million. Interestingly, the study also showed that the total income earned from the advertising industry was about 108 billion dollars that had a direct link with 54 billion dollars sale. In the same year, around 429,654 individuals got jobs through advertising and positively affected Missouri’s economy in a healthy way. Moreover, 94257, jobs were generated in sales department in various organizations which was the outcome of excessive adverting in all sorts of media. Furthermore, the idea of outdoor signs in America gained so much popularity and in this regard both sate and federal state declared signage as a secure, fast and easy way for advertisement. The study also disclosed that the ads simulated additional buys by providing significant and useful information to a wide range of consumers in the household and businesses, which was also a crucial factor in the market economy. (Davidson, 2005) Due to severe business competition among most of the business organizations in the US, an overwhelming growth of adverting agencies has been observed. Advertising agencies list have showed a constant growth over the past few decades, other than agencies contributed the honor in former years, none have offered substantial or handsome national ads or print campaigns. In spite of a collective ten percent growth in billings from 1. 781 billion dollars in 2004 to 1. 963 billion dollars in 2005 a huge number of ads agencies received a decreased in accounts also declined in cash flow and profitability. According to a study conducted by insider’s reporters from Universal Mc Cann showed that, advertising expenses increased by 4. 5 percent in the year 2005 as compare to 2004 figures. Interestingly, during that rising period black ad agencies did not contribute to country’s economy as much amount as predicted. (Advertising agencies, 2006) A study conducted by The Direct Marketing Association showed that, in New York, in the year 2005, different organizations spent around 161 billion dollars on direct marketing. When this investment measured against total New York income this also had a direct relation with the advertising expenses of that period. Entirely, direct marketing share was 10. 3 percent of the total US Gross Domestic Product in 2005. (Growth Trends Continue, 2005) In the past decade, a tremendous growth has been seen in online advertisement In this regard, two different images marked the way of efficient online advertising which included: direct response or brand building. Due to the abundance availability of computers online advertisement has become a yardstick for consumers. Advertising especially in the US, developed in reply to a huge expansion in markets. For example, product manufacturers and service sellers attempts to reach ever growing customers throughout the nation. In this context, many organizations have adopted technological equipment, better management and so on to meet not only the desired quality of the customers but also provide products on time. According to a research conducted by Molinari and Turino in 2006: o Expenses on ads are positively correlated with Gross Domestic Product. o Both consumption and investment has a direct relation with ads expenditures. o The organization’s ads positively impact on family demand of good. As a whole, it connotes that ads positively impacts the aggregate utilization of the economy as if it were an exogenic demand shock. o At state level advertisers contribute a multitude of taxes which normally includes, property tax, state income tax so forth. (Molinari and Turino, 2006) â€Å"The latest e Marketer estimates put total US Internet ad spending at $16. 4 billion this year, a 30. 8% gain over last year’s $12. 5 billion. The prime engine behind such strong growth is Google, whose US online advertising revenues are expected to be more than $4 billion (after subtracting traffic acquisition costs paid to network partners). † (Hallerman, 2006). Outstanding results of advertising will continue to come in the last months of 2007; with aggregate US online ad spending reaches at the end of this year around 19. 5 billion dollars. Nonetheless, this will be because of overall US economic weaknesses, in the United States real Gross Domestic Product growth is likely to down from over 3 percent in the year 2006 to around two percent in 2007. It is interesting to note that, in spite of the fact that the United States economy is considered a soft economy, growth in online advertisement will continue to rise by 17. 5 percent in the next year. Merrill Lynch a media analyst Lauren Rich Fine said on Friday, December 1, as reported by Media Post, 2. 6 percent expenditure on aggregate ads for 2007 is not astonishing, and can be devoted as a more muted economic in the following year. Furthermore, as Steve Fredericks, the president and CEO of TNS Media Intelligence, said e Marketer in early December, â€Å"We see GDP remaining sluggish at least through the first half of 2007†. (Hallerman, 2006) The year 2008, the United States Gross Domestic Product is expected to get closer to three percent. Online advertisements will also bounce with a 22. 1 percent significant increase as compare to 2007. This is also expecting that, due to the fact that political races primarily depended on internet communication, with the 2008 election, ads will share a significant amount on overall country’s economy. Besides, 2008 summer Olympics will also play a tremendous role in advertisement investing. (Hallerman, 2006). A study conducted by Direct Marketing Today (DMA), the study primarily reported the top line outcomes from the DMA insight econometric model of the United States direct marketing activities for the state as a whole, the Business to consumer (B2C), Business to Business (B2B), the most important direct marketing media, and for the economy’s of around 50 organizations group. Some study’s interesting findings are: Continue Growth By the year 2009, it is estimated that the sales driven by direct marketing will grow by 6. 4 percent, which will be 5. 3 percent up if compare to 1999 to 2004 figures. Jobs DM- driven employment is forecasted to grow by two percent per annum throughout 2009. The report also showed that, in the year 2005, direct marketing expenses directly supported 10. 6 million jobs. That was not only included direct marketers but also other employees whose requirement were needed to fulfill increased orders produced by direct marketing. High Return on Investment In 2005, an investment of dollar 1 in direct marketing ad expenses returned, on average 11. 49 incremented incomes across all organizations. Important Part of the Advertising Mix â€Å"Direct marketing advertising expenditures accounted for 47. 9% of total advertising in 2004, up from 46. 9% in 1999†. (Growth Trends Continue, 2005) Conclusion In today’s world of complex business, in order to survive in a severe competition market both domestic and international organizations paying a large amount of their product cost in shape of advertisement. Certainly, virtually all types of business even those not perceived as major marketers rely on advertising for their economic well-being. As discussed above, no body can deny the statement that, in the US ads play a vital role in boosting up the nation’s economy. Thousands of individuals every year get jobs through internet, newspapers, billboards and TV ads, consequently, decreasing unemployment ratio of the country. Throughout it has also been observed that, expenditures on ads have a direct link with the US total sale of each year. In this regard, ads share a fairly large amount in the US Gross Domestic Product (GDP). Certainly, through advertising almost all consumers come to know about product cost its specific features and most importantly ad gives a consumer an open right to discriminate between two identical products and buy the good one. References Advertising agencies: (June, 2006), A sluggish economy, reduced margins, and institutional racism are delivering severe blows to black ad agencies. Black Enterprise, Davidson Jim, (2005), Davidson & Company for The Advertising Coalition Growth Trends Continue for Direct Marketing, (September 29, 2005) http://www. the-dma.org/cgi/disppressrelease? article=704 Accessed, July 27, 2007 Hallerman David, (DECEMBER 6, 2006)Internet Advertising Will Weather a Sluggish Economy, Growth in Internet ad spending will slow next year before rebounding in 2008. http://www. emarketer. com/Article. aspx? id=1004345 Accessed, July 27, 2007 Molinari Benedetto, Turino Francesco, (May 31, 2006), The role of Advertising in the Aggregate Economy: the Working-Spending Cycle O’Connor Gina Colarelli, (1996), Translating Values into Product Wants, Journal of Advertising Research, Volume: 36. Issue: 6. Page Number: 90+.