April 14th, 2011
Study Measures Ad Industry’s Impact on State Economies
The New York Times
THAT there are “mad men” in New York, the home of Madison Avenue, goes without saying. But who knew there were 2,216 mad men — and women — in South Dakota, 11,009 in Alabama, 1,165 in Vermont and even 1,391 in Alaska?
Those are among the findings of a study commissioned by the Advertising Coalition, a consortium of trade organizations and associations that represent the ad, marketing and media industries.
The study, conducted last August, found that 630,783 people worked in advertising in the United States, and that they were responsible for ad spending that totaled $278.9 billion.
The study is an updated version of one that the coalition commissioned in 1997 and again in 2004. The goal is to demonstrate that the industry affects many places beyond those traditionally associated with the business, like New York and California.
To that end, the study includes data meant to suggest a multiplier effect — that the people who work in advertising, and the money that they spend, create many additional jobs and stimulate significant economic activity.
Nationally, the study declares, “every dollar of ad spending generates just under $20 of economic output, and every million dollars of ad spending supports 69 American jobs.” Thus, the 630,783 people who work in the industry contribute to 19.1 million people having jobs, according to the study, and the $278.9 billion spent on advertising contributed to $5.5 trillion in economic activity.
The study also reports the data not only state by state but also by Congressional district.
So, for example, the study describes how in the 3rd Congressional District in Arkansas, in the northwest part of the state, ad spending accounts for $14.3 billion in economic output, or 20.1 percent of the $71 billion in total economic output in the district.
And the sales of products and services in the district driven by advertising, according to the study, “help support 59,662 jobs, or 15.5 percent, of the 385,504 jobs” in the district.
The summaries of those effects carry the assertive headline “Advertising Generates Sales and Jobs in ...,” followed by the number of each of the 435 districts.
“It opens people’s eyes,” said Robert D. Liodice, president and chief executive of the Association of National Advertisers, which is part of the coalition along with organizations like the Four A’s, formerly the American Association of Advertising Agencies; the National Cable and Telecommunications Association; and the Newspaper Association of America.
The primary use for the study will be, like its predecessors, to fight proposals on federal, state and local levels to raise revenue by passing taxes on advertising or to limit or eliminate the deductibility of advertising as a business expense. For instance, during the debate last year before the passage of the health care law, some legislators sought to reduce the deductions for pharmaceutical advertising.
“When you talk to congressmen and senators, the bottom line of jobs and dollars almost always immediately gets their attention,” said Daniel L. Jaffe, who is executive vice president of the Association of National Advertisers and runs its Washington office.
“We’ve always known advertising had major impacts,” he added, and given the current economic conditions, the study enables the coalition to counter proposals affecting the industry by saying: “It’s bad enough already. Do you want to make it worse?”
Before the coalition received the results of the study, which was conducted by IHS Global Insight, a market research firm, “what I was afraid of was that you’d look at Wyoming or Montana or Alaska and you’d see very little effect,” Mr. Jaffe said, “but that’s not what happened.”
“Yes, there is significant variation from state to state and from Congressional district to Congressional district,” he added, “but there is no place that is an advertising-free zone, where advertising is not an important part of the marketplace.”
Mr. Jaffe’s counterpart at the Four A’s echoed his effusiveness.
“That tool is the most powerful we have in convincing lawmakers of the power of advertising,” said Dick O’Brien, executive vice president and director for government relations at the Four A’s, who is also based in Washington.