Advertising's Role in Capitalist Markets: What Do We Know and Where Do We Go from Here?

Gerard J. Tellis
Marshall School of Business, University of Southern California, Los Angeles

The author thanks Bob Woodard for triggering reflection on this topic and Cheryl Tellis for comments on an earlier draft. This article draws from the evidence in the authors' recent book, Effective Advertising (Sage, 2004) and presents ideas from his forthcoming book, Handbook of Advertising, co-authored with Tim Ambler (Sage, 2006).


Advertising is one of the most fascinating phenomena in modern capitalist markets. It is pervasive, perplexing, multidimensional, and unfathomably rich. It is seemingly simple, yet full of paradoxes. Lay people and some experts assume they understand well how advertising works. Yet their simple conclusions may be quite wrong. Decades of research seem to have led to some generalizations. Yet even experts strongly disagree about the meaning and implications of this research. Most importantly, advertising is one business activity that religious leaders decry as amoral, economists analyze as capitalist excess, sociologists dismiss as corruptive, and politicians tolerate as a nuisance. Perhaps none of these groups fully appreciates that advertising is an essential force in capitalist markets, the lubricant of competition, the vehicle for the communication of innovation, and the corollary of a fundamental right of all peoples, free speech. This article summarizes what we know about advertising that disproves many current assumptions and suggests many urgent areas of future research.