Posted by: Olga Kharif on January 22, 2010
Ad spending by wireless companies is going through the roof. Sprint Nextel’s ad spending might have hiked 40% in 2009 over 2008, according to Jan. 22 report from Sanford C. Bernstein analyst Craig Moffett and TNS Media Intelligence. It now adds up to 4.4% of Sprint’s revenues — double the level of its peers.
Yet, whether Sprint’s aggressive marketing has paid off is debatable. “The astronomical growth in ad spending by Sprint is not translating into increased gross additions,” Moffett writes. “Sprint accounted for 26% of Big Four ad spending, but just 14% of Big Four post-paid gross additions.” While Sprint is struggling to retain its subscribers, Verizon Wireless, which actually slashed its ad spending 7% last year, has managed to grow its customer base. While ad spending by U.S.’s six largest wireless carriers declined steadily throughout 2008, it jumped 4.3% last year, Moffett estimates.
What’s clear is that carriers’ ad spending no longer translates into subscriber gains. As Sprint has kept losing subscribers over the past several years, many analysts blamed that on lower advertising spending by the company. Well, now that Sprint has ramped that spending up, it’s not helping as much as hoped.