Ad Industry to Inject $5.2 Trillion into US Economy in 2005

30 November 2004

"For years I thought what was good for our country was good for General Motors and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country."

Thus quoth GM president Charles E Wilson in his famed testimony to the Senate Armed Services Committee on his proposed nomination in 1953 for Secretary of Defense.

Fifty-one years later, the American advertising industry too is in Wilsonian mindset, according to a new report by The Advertising Coalition - a body representing nine national media and advertising trade associations.

TAC was formed in 1988 to coordinate the fight against federal proposals to tax advertising. But with the re-election of George W Bush there seems little prospect the threat will be revived. Nonetheless, the industry is taking no chances and continues to evangelize its value to the US economy.

Its latest screed, Comprehensive Economic Impact of Advertising Expenditures, forecasts that advertising and media patriots will inject $5.2 trillion (€3.91 trillion; £2.74 trillion) into the US economy next year. This eyewatering figure takes account of all direct adspend, supplier spending and inter-industry activity.

Total advertising spending by businesses in the US for 2005 is predicted to be in the region of $278 billion. The TAC study then adds $2.3 trillion (being advertising's direct impact on sales), plus a $1.2 trillion stimulus of supplier economic activity. It then factors in a further $1.4 trillion arising from inter-industry economic activity.

Advertising is also good for US jobs. Using a similar form of extrapolation, the study claims that 21,117,903 jobs will be supported by advertising spending in 2005. [Note the last three digits - howzat for pinpoint forecasting?]

Says survey director, Dr Lawrence R Klein, a Nobel Economics Laureate: "This study drives home the importance of advertising in America and the massive impact it has on the nation's economy. Without advertising, consumers would have very limited information about the purchasing options available to them. Advertising also generates economic activity that creates jobs for more than 21 million American workers which is a significant contribution for an industry."

The good doctor abjured the implied corollary: "So don't even think about taxing US advertising!"

The organizations underwriting the study are: the American Advertising Federation; the American Association of Advertising Agencies; the Association of National Advertisers; the Grocery Manufacturers of America; the Magazine Publishers of America; the National Association of Broadcasters; the National Cable & Telecommunications Association; the Newspaper Association of America; and the Pharmaceutical Research and Manufacturers of America.

Data sourced from American Association of Advertising Agencies; additional content by WARC staff