Telecom companies - actually wireless companies - are spending billions of dollars in their bid to attract new customers (or even switchers) according to data collected by TNS Media Intelligence for Advertising Age. )
Collectively, Verizon ($1.72 billion), Cingular ($1.31 billion) and Sprint ($995 million) spent a whopping $4 billion on advertising. In fact their spending was up a whopping 15.9%. Vonage was the 26th largest spender in 2005, doling out $413.5 million, up 552.6% from 2004 when the company spent mere $63.4 million. Well, now that the IPO is done, we should expect some decline in that drunken spending! (Of course there is a cheaper, easier way of attracting customers - Spyware.)
Who do you think will be the big spender from telecoms next year? My guess is AT&T, and all those MVNOs who will blow throw megamillions of investors money. And then they say times are tough on Madison Avenue ;-)
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3 comments so far
2:21 PM PT
I couldn’t agree with you more. A law I formulated a couple of years ago says: Whatever you will save in production costs will be gobbled up by Marketing and Sales. In the Telco world this seems to be even worse.
In the Netherlands a cableco called Casema with 1,3 million subscribers, €310 million revenue and €11.4 million profit was sold for €2.1 billion to Cinven/Warburg. That is €1600/subscriber Add the amounts they spent on advertising, add the introduction of digital tv, add the upgrading of networks for Docsis 2.0b etc. These guys spend well up to €2000 per customer and they actually hope to make a profit.
However, in The Netherlands T-mobile announced today they will half the bonus per new subscriber they give to resellers like the Phone House. These bonuses could go up to €400/customer for a two year subscription. Now they hope all their competitors will too.
8:21 PM PT
all these service providers have close to zero incremental costs to add users to existing networks/systems (excluding the big upgrade capex, which is best spread across more users). they have every incentive to gain incremental biz
6:17 AM PT
A lot of this money must be spent on the upcoming data plans and Triple play bundles. And a significant portion on getting users switched from competitors, as the market for new users is ‘almost’ stagnated.