Advertising expenditures are monies spent promoting a company's products or services. Businesses need to apprise consumers and other companies about their offers. Therefore, they need to use certain advertising mediums to make people aware of their brands or company name. Some companies generate 100 percent of their business through advertising, such as Internet businesses. Restaurants and stores advertise but also benefit from walk-in traffic. All businesses must decide how much to allocate toward certain types of advertising media.
Types of Advertising Expenditures
Advertising expenditures can include monies spent on television, radio, magazine and newspaper ads, direct mail and the Yellow Pages. Companies also advertise on the Internet through search engines, banners and email marketing. Those who advertise in magazines or newspapers either use display or classified ads. Display ads range in size from business cards to full-page promotions. Classified ads usually appear in quantity at the back of publications. Direct mail advertising can include coupon magazines or envelopes that contain sales letters, brochures and order forms. Coupon magazines contain coupons from dozens of advertisers. They are usually distributed through the mail or in Sunday newspapers. On the Internet, search engines include sites such as Google, Yahoo, Alta Vista and Lycos. Banners are the Internet's version of display ads.
How Media Companies Charge
Television and radio stations usually charge by the number of seconds an advertisement runs. For example, a 30-second television commercial may cost $350,000. Radio commercials are usually much less expensive. However, both types of media usually have multiple time frames for which companies can advertise. Magazine and newspaper publishers typically charge companies per word or line for classified ads. Businesses pay by size for display advertisements, with larger ads costing substantially more. Internet search engines like Google charge according to rank. For example, companies pay much more to get first-page rankings when people search for their types of businesses.
Reach and Circulation
Companies usually pay according to the reach and circulation of various advertising media. Reach is the number of people touched by a company's advertisement, according to Businessknowhow.com. For example, companies pay more for a television ad that reaches a national audience versus a local or regional audience. Magazine and newspaper publishers charge companies by circulation. Circulation is the number of copies that are distributed by a publishing company. Display and classified ads that are distributed to 100,000 people usually cost more than those sent to 10,000 people. Direct mail is also based on circulation. It costs businesses more to mail to 50,000 people than to just 5,000.
Frequency
Advertising expenditures are also contingent upon the number of times an advertisement is repeated. Repetition of advertisements is called frequency. Companies pay more to run 10 television or radio advertisements than one, two or five. The same can be said for newspaper or magazine advertising: Four ads cost more than one or two. However, some publishers give companies price breaks for running multiple ads. For example, a magazine publisher may give a company one week free if they advertise for three consecutive weeks.
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