Advertising

 In 1998, $351 billion world wide

 Source: The Penguin Atlas of Media and Information, Penguin, 2001.

 Average Expenditure per person: $300 or more in the

US ( which has 43% share of world market)
 Canada ( which has 1.9% share of world ad market)
averages between $100 and $199
 Almost equal 6 way split: radio,TV,mags, news, cinema, outdoor

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Learning Objectives
 What is advertising?
 What are its economic characteristics?
 Three views of advertising
 Typical Regulation of Advertising
 What are its effects?

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Definition
 Persuasive message to buy, sell or change
behavior
 Biagi: involves payment to place message and
identification of sponsor as well as selling of
goods and services
 Also involves the latin meaning of take note or
consider– that is the goal is to be noticed
 Fleras argues there are structural, functional and
ideological elements to the definition ( text: 176)

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Definition Cont’d
 One element of the 4 Ps of marketing ( production,
pricing, promotion, etc)
 An indirect or third party form of financing the media
 Used to be the dominant form of media financing– still is
in television,mags and newspapers
 But in 1990 in electronic media direct consumer payment
( subs, pay per view) exceeded ads
 Central to consumer culture: establishing the codes,
cultural norms, expectations of consumption, and market
signalling

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Main Forms of Financing the
Media
 Advertising
 Direct Subscription ( cable,
newspapers, etc)
 Transaction Revenues
 Licence Fees ( BBC)
 Taxes ( CBC/ matched by Ads)

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Role of Advertising
 Principal sources of revenue for:
newspapers, radio, television,
magazines
 Not books, film, sound recording, or
telecommunication
 Uncertain but growing role in the
Internet

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Economic Functions of
Advertising
 Generating profits by selling products
or services
 Fostering brand name recognition
 Establishing corporate ‘good will’ or
corporate image for social
responsibility
 Supporting the economic status quo

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Social History of Advertising
 Earliest known ad 1000 BC offered a “whole
gold coin” for the return of a runaway slave
 Only began in mass form with the printed
press after Gutenberg
 Associated with the rise of mass production
techniques in capitalism especially in 20th
century
 Needed to stimulate mass demand,
synchronize or aggregate demand with
oversupply

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Economic Characteristics
 A function of the gross domestic
product: tied to business cycle
 Segmented by global/national/local
markets
 Newspapers and Radio: mostly local
retail
 TV mostly national/ international

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Economic Paradox
 Just under half of world advertising
spending is from US
 Yet 2/3rds of world population cannot
afford the goods the US advertises

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Economic Characteristics 2
 Ad rates rise in condition of
monopoly/oligopoly
 Ubiquitous
 Less than 5% of all TV signals are non
commercial
 Few magazines, news or other sources are
without ads

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Economic Characteristics 3
 Mainstream, ad supported media exist
to make money from advertisers
 Content and style are often reshaped to
comply with demands of ads in a highly
segmented market
 How? Ads laid out first on a newspaper,
then text
 How? Media often reposition to appeal to a
better market segment ( eg. Jake)

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Theories of Advertising
 Neo liberal or pro market view
 Reform Liberal or pro regulation view
 Critical or anti consumption view

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Neo Liberal/Pro Market View
 Implicit model of the rational consumer,
maximizing self interest
 Individual recognises wants, searches,
evaluates and purchases
 Advertising aids in the consumer’s search
 Serves essential market communication
function in the exchange of messages
between buyer and seller

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Neo Liberal cont’d
 Stigler and the Chicago school of economists
argue that ads reduce search time: make the
consumers ‘foraging’ more efficient
 Permit better aggregation of demand, thus
facilitate economies of scale
 Decrease unit distribution costs
 To the extent ads persuade someone to buy,
provide employment, ensures investment in
production is profitable

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Neo Liberal cont’d
 Problem: are sales linked to advertising or the
business cycle?
 Neo liberal studies argue that sales depend on
disposable income, not advertising
 Advertising thus mediates market forces, but
does not create them ( limited effects thesis)
 Consumer is sovereign

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The Reform View
 Eg. Galbraith et al
 Sees from a social welfare standpoint, that advertising is not
productive, but wasteful and inflationary
 Advertising creates ‘false wants’
 Promotes hypermaterialism/ hedonism/ environmental
degradation
 Point to evidence that ads have not grown as a % of the GNP
over time as sign that ads are not ‘productive’, or ‘dynamic’
engine
 Furthermore argue that ads ‘buy’ consumer loyalty: the bigger
will win, so oligopolies emerge, reducing market competition

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Reform Cont’d
 Refute thesis of consumer sovereignty
 Refutation is easiest in ad-supported media,
where intermediate demand of advertiser
creates valuation: not viewers
 Argues needs are created: an oligopoly of
producers control demand
 Thus the state must play a central role in
regulating ads or ‘policing persuasion”

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The Critical Perspective
 Eg: Adbusters
 Sees Advertising as central to the power structure of capitalism
 Goes beyond the reformers, arguing for ‘culture jamming’
 Voluntary simplicity, preservation of the environment, anti-
materialism
 In particular, looks at the system of ownership and control of the
advertising agencies and notes 5 out of the big 8 are American
 These huge companies( WPP group, Thompson, Ogilvie and
Mather) integrated to Public Relations Firms which service big
business and big government
 A Seamless Web of the Persuasion Society

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The ‘Problem’ of Advertising
 Business pay for ads on shows
 Shows on TV ( main channels 100% supported by
ads) or newspapers ( 80% supported by ads) are not
the product
 The product is ad time or space sold to advertisers
 What advertisers buy is the access to audiences
 No direct price signal between consumer and editor
or media
 No direct cues as to likes/dislikes or customer
preference

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Fleras’ Argument About
Advertising being the Message
 Irony ( Fleras, p. 177): content or
programming exists to deliver audiences to
advertisers
 “ Ads cannot be considered interruptions
when market values prevail; they are the very
foundation for programming in connecting
audiences with consumerism”

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The Myth of Consumer
Sovereignty in Ads
 No direct signal between consumers and media providers
 In fact, share of conventional TV audiences is declining but
ad sales increasing
 NOT ALL CONSUMERS ARE EQUALLY VALUED: SOME
ARE DISCOUNTED, AND SOME ARE PREMIUM
 Advertisers’s desire to reach the attractive youth consumer
segment explains ‘Friends’, recent rise of Reality shows
 Also explains exclusion of the low spenders: blacks, hispanics or
old in the US which are less attractive ad segments
 Explains exclusion of poor, old and visible minorities in most ad
markets in Canada

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The Myth of the Free Ad Lunch
 Costs of ads passed on to consumers: affect 10-15%
of cost of goods.
 Current estimates of ads in Canada suggest ad
spending of about $900 to reach each hhld: this is
paid by all, even the poor, whether they want the ads
or not
 Such hidden, indirect payment is not known to
consumers
 Explains why they prefer ad supported, so called
‘free’ media to pay per view or other services on the
Internet: they are unaware they are already ‘taxed’ by
the manufacturers and distributors of consumer
goods

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The Canadian Small Market
Problem
 Canada has half the per capita size of ad spending
as the US– tougher market for Canadian cultural
industries
 Overspill of US ads vitiates demand
 Segments of the industry: ( health, law etc) are either
publicly owned, or prevented from advertising
 Retail sector in Canada has not been as competitive

 In TV, if US programs are more popular: Canadian businesses

prefer advertising on US shows, weakening indigenous
production markets ( a vicious circle) thus weakening
competition, and leading to increase in market dominance and
higher US ad rates

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Policy Responses to small
market problem
 Income Tax Act prohibits spending on US media as an
allowable business expense in Canada
 This is intended to protect ‘diversion’ of ad money south of the
border
 Regulations: ( Canadian Radio-television and
Telecommunications Commission) create rules like the “
simultaneous substitution rule” which allows Canadian
stations who have bought the rights to a program to insert
their ads sold against it in the imported US signal
 Tax money used to subsidize public/non commercial media
( CBC, community TV)
 As well, tax money increasingly being used to ‘advertise’ in
public sector areas
 Public health issue: allow, like the US pharmaceutical
manufacturers to advertise to Canadians?

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Attack under Globalization
 Before 1999, Canada’s Magazine Policy prevented ‘split runs’ ( except
for Time Canada and Readers’ Digest)
 Goal was to prevent US media companies getting around the Income
Tax Act by publishing ‘virtual’ editions which could scoop Canadian
ad spending without producing Canadian editorial
 As well, Canadian magazines were allowed to mail free to their
customers ( unlike US mags) ( see Stoffman, cited in Fleras, p. 208)
 US launched a trade protest under the World Trade Organization on
the grounds that magazines offended the rules of free trade:
 National Treatment rule: despite exemption of cultural services from
NAFTA
 Canada lost. Instructed to strike down legislation: had to create new ones,
and offer subsidies to Canadian magazine sector
 FREE TRADE IN AD SERVICES ON US AGENDA

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Classic Forms of Regulation
 Truth in advertising: deceptive advertising may be a
criminal or civil offense
 ( but intent must be established as well as proof of harm)
 Prohibition or strict regs on Ads for hazardous goods
( drugs, tobacco, liquor etc)
 Policing Ads directed at children
 Ad free zones promoted for very young children, since children
cannot distinguish between an ad and a program
 Pre airing censorship: to prohibit violence or other anti social
contents
 Other types of ad regulation
 Gender portrayal etc.

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The Terms of the Regulation
Debate
 What is permitted
 Who is permitted
 When and Where it is permitted
 To whom

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Regulation Around the World
 Various levels of constraint around the world
 Sexual violence against women in ads is banned around
the world except Argentina, Paraguay and Thailand
 Some categories of products/behaviors are deemed
offensive and thereby restricted in certain countries:
 Sanitary products
 Toilet paper
 Undergarments
 Undue attention to breasts or buttocks
 Physical intercourse: hetero or same sex

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Canadian Ad Institutions
 The Canadian Advertising Foundation
( CAF)
 Advertising Standards Council
 Receive complaints and preclear ads
directed at children

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Issues in Advertising
 Recent ad issue concerns:
 Historically, ‘patronage’: control of media content
through sponsorship ( Disney)
 Increasingly: ad clutter: more than time allotted ( 18
minutes out of every hour)
 Sound /noise offense
 Product placement: eg. American Idol
 Difficulty in measuring ad impacts
 Catholic Church in BC protesting VanCity ad
representing a gay couple ( as part of a resistance
to revision of Canadian marital laws to include
same sex couples).

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Marketing Surveillance Society
Thesis
 Movement to e-commerce on line allows single source,
integrated market research intelligence, new levels of custom
advertising to markets of one
 See www.redsherriff.com
 An internet tracking company which downloads a hidden
Javascript on to y our browser when you visit one of their
affiliated sites
 Can track where you visit, how long you stay, what you bought
and create a full virtual data shadow
 Sell it to business who will design a marketing applet to
bombard you
 Consumer mobility– tracking and ad campaign design now
central to new forms of market/advertising
 Privacy, issues of ‘informed consent’ and other concerns

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Rhetorical Techniques of Ads
( see Fleras, 202-203)
 1. Shock/Humour/Novelty: to get
attention
 2. Repetition
 3. Visual Style Codes:
 4. Ubiquity

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Social Psychology of Ads
 Maslov’s hierarchy of basic human needs:
 NOT directly observable:
 survival, physiological sustenance
 personal safety
 social belonging
 self esteem
 self actualization
 aesthetic, expressive needs
 higher level needs become salient when survival needs
are met

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Effects of Ads
 Saturation
 See now more than 500 ads a day/182,000 a day
 Very low levels of recall
 Avoidance
 Use remote control to dodge ads
 Tape and fast forward
 Defensive Industry Response: Integration
 Fool consumer by integrating commercial and content: product
placement, seamless infomercials
 ‘advertorials’
 Issue of ‘due process’: are consumers aware of what is an
appeal and what is not?

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Effects Cont’d
 Socio-Cultural
 Used to identify ‘in’ and ‘out ‘ groups
 Create ideal role models
 stereotyping
 Psychological
 Behavioral: induce a buy
 Attitudinal: like the product/associate with attributes—lifestyle
appeals
 Cognitive: recognize, evaluate what is needed
 Political
 Political advertising is more often using conventional ad appeals
( celebrity/spectacle positioning )

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Content Effects
 Drive to placate advertisers: indirect economic
censorship ( Politically Incorrect case during Attack on
America)
 Interrupt content: in newspapers, articles are blocked
around ads: more ads, shorter news holes; drives the
pyramid style of presentation…drive format and medium
expectations
 Create high aesthetic standards:4 1.3 million per 15
second ad / Superbowl exceeds even the highest
budgets films …shape novelty/innovation/ imitation
trends

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Ideological Effects
 Advertising defines what is important or desirable
 Draws attention to certain aspects of reality while
ignoring others ( Fleras, 171) it is a discourse about
‘reality’
 “Manufacture of Discontent” where the only solution is
through Buy Buy Buy
 As a system of persuasion, advertising is propoganda
(Fleras, 211)
 Have we become citizens of shopping malls?

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Recommended Sources
 Benjamin Singer (1995) “Advertising” A
Sociocultural Force” in Communications in
Canadian Society, 4th ed., Toronto: Nelson.pp.
123-138,
 Richard Jackson Harris (1999), “Advertising” in A
Cognitive Psychology of Mass Communication: 3rd
ed., Mahwah NJ: Lawrence Erlbaum Associates, pp.
71-95.
 Leiss, Kline, Jhally: Advertising as Social
Communication
 Frank: Liberation Marketing
 Klein : No Logo

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