Microsoft vs. Apple advertising spending: The real numbers to watch

Much has been made in the past couple days about the $486 million Apple spent on advertising in its most recent fiscal year, as first reported by the eagle-eyed Lindsay Blakely of the BNET business technology news site.

Most of the ensuing commentary focuses on the fact that Apple has been openly poking fun at Microsoft for spending so much on its Windows Vista campaign -- which actually cost a mere $300 million. Oh, the irony!

Well, not really, as it turns out.

For starters, the $486 million vs. $300 million comparison isn't the best one to make, as TechCrunch and others have noted. It's stacking up Apple's companywide advertising (iPhone, iPod and Mac) against  Microsoft's spending on a single product. Even though Windows is Microsoft's biggest product, the Redmond company's advertising spans many other offerings.

In fact, Microsoft's companywide advertising budget was $1.2 billion last year, significantly more than Apple's budget, as shown in the chart above. (Note: Microsoft's fiscal year ends in June; Apple's in September.)

But that companywide comparison isn't quite right, either.

After all, Microsoft is a much larger company, involved in specialized business applications, corporate databases, video-game consoles and many other areas where Apple has comparatively little or no presence. Of course Microsoft spends more on ads. So a better way to level the playing field, for purposes of comparison, is to consider advertising spending in the context of revenue.

After digging through the SEC filings and crunching the numbers, I came up with the chart below. It's not a perfect measure, either, but in rough terms, this ratio shows the relative effectiveness of the Apple and Microsoft advertising budgets -- how much each company spends on advertising as a proportion of every dollar in revenue. In general, the lower the ratio, the better.



As you can see, the companies are very close, but Apple doesn't have to spend quite as much as Microsoft does to bring in a dollar of revenue. And the difference has become more noticeable in recent years. A variety of factors could be at play here, including the power of the Apple brands, the value of word-of-mouth advertising, and the differences in their product mixes.

Feel free to float theories in the comments below.

At any rate, this should be the interesting trend to watch unfold in the years to come.