Apple Ridicules Marketing Over R&D - I'm An Irony

You know, I own some Apple stock (AAPL) stock now, so it saddens me to have to point out how ridiculous their new anti-Microsoft ads are. Basically, Apple is (again) mocking Microsoft's Vista OS, and points out that they are trying to fix the problem through advertising and not R&D. I generally agree that making your product perfect should be the first priority, and once you have that, hey, market that puppy to death (or better yet, let your happy customers do it for you). Apple makes a great point, over-spending on advertising when you don't have the product to back it up can eventually be your downfall. Apple misses sorely, however, when they say that is Microsoft's problem, when it is actually their own.

First of all, while these two are bickering, Google is slowly releasing a version of every piece of software that Microsoft makes, for free, and Asus is manufacturing $350 laptops, capable of meeting all the standard needs of college students everywhere. Google also released the first smartphone with a Google Android, which does not have an exclusivity contract and may soon greatly challenge the iPhone. I'm writing this on an Asus computer, and my life belongs to Google, and yet I've never seen a TV commercial for either. That's because Asus and Google focus on getting the product right, and letting it sell itself. All the while, Apple and Microsoft are spending like crazy...

"How crazy are they spending?" you ask? Great question. Instead of going to the headlines, we're going to hit up the most recently filed Income Statements instead. You know, the place where these companies have to legally disclose this stuff, unlike their press releases and seeded bloggerganda (if that's not a word, it should be).


We're going to compare the R&D (research and development) line item to SG&A (sales, general and administrative) for these companies. Granted, SG&A is a proxy for true marketing spend, but it works well for a large-cap, 3-company comparison in the same industry. So, away we go (Quarterly comparison of Q2 2008 (ending in June) - all numbers in $Millions):

Google: SG&A: $959, R&D: $682, Sales: $5,367
Microsoft: SG&A: $3,996, R&D: $2,035, Sales: $14,454
Apple: SG&A: $916, R&D: $292, Sales: $7,464

So what?
Apple's sales to R&D is 25/1 - so they only put $1 back into product development for every $25 spent. Google is 8/1 and Microsoft is 7/1. So Microsoft actually invests much more of it's profits back into the products we get.

Apple has a Marketing to R&D ratio of 3.13 - so for every $1 on R&D, $3.13 goes to Marketing and Overhead. Microsoft and Google's ratios are 1.96 and 1.40 respectively, much less than Apple, relatively speaking.

But sadly, Apple has the highest return on total (SG&A + R&D) investment, meaning they are making more money by spending on ads than spending on the products themselves. This, of course, is the fault of the consumer. Crap. Great for those of us that work in Marketing of course, but doesn't it piss the rest of you off?

Even worse, doesn't it piss you off that Apple makes commercials ridiculing spending on ads, when it is actually their core strategy? Uhg, I feel dirty.