Those AIB Ads….
Oh Hai, I Can Haz Catipal? KThxBai.
AIB spent a large sum of money yesterday reassuring us that they were primed and ready to back their customers with renewed vigour. As they might, having had €3.5bn of our money pumped into their cobwebbed coffers to help lubricate the credit system. The ads contain the line: ‘As Ireland’s largest bank we can – and must – play a role in getting our economy back onto its feet.’
Full-page ads across a large section of national newspapers cost, on Mark Coughlan’s estimates, €160,585 – a substantial amount on any given day, and certainly enough to raise eyebrows when it’s felt that banks have been more flaithuileach than they should with other peoples’ money. Many could rightly feel that the money would have been better spent invested in SMEs or loosening lending policy.
The figure, in perspective, represents 0.005% of what the government invested in AIB, or 1/20,000th of the principal (Meaning they still have 99.995% of it to play with, or €3,499,839,415). Given the size of the principal, hewing off even that small a fraction yields a breathtaking lump. Of course, €28,615 of that lump goes directly back into government coffers as VAT paid on the ads by AIB to the various papers, so all is not lost. The balance will also trickle back into the Irish economy (bar, perhaps, the money spent with the Murdoch-owned Sunday Times) as the newspapers go about spending their revenue on other goods and services, wages, PAYE/PRSI and, if any of them manage to post a profit, corporation tax.
Mark offers a few suggestions on the alternative uses of the money. He says: ‘It would have funded 12 SMEs with the maximum FÁS staff training scholarship (€13,000)’, and goes on to point out it would pay for three school teachers or two Gardai. All good suggestions, but by calling it a ‘€160,585 thank you’, the post is missing the point slightly. (A disclosure before I go on – my initial reaction was exactly the same as Mark’s, and we discussed it on Twitter).
The full-page ads are just that – ads – and must be seen as such. Marketing mogul David Ogilvy once said: ‘The man who stops advertising to save money is like the man who stops the clock to save time’. Personally, I’ve never invested more in hitting potential customers with advertising than in the last few months, which have been the toughest Ireland has ever seen. The purpose of ads is to inspire confidence and convince customers that they can rely on your product. People have lost their belief in the banking system which is, correspondingly, the source of all credit, and a prop to all industry. If SMEs, sole traders and the rest feel they have no chance of securing a loan or even useful advice by going into the bank, what options do they have? Going to the wall, and then the dole, is one, and that has a much more detrimental effect on the exchequer than a few newspaper ads.
AIB and BOI have a huge role to play in the next few financial months. Their trump card is the €7bn recapitalisation that they have just received, giving them a huge leg-up in security terms over and above other banks. In order to make those work, they need to be able to disburse that money into the Irish economy, and to do so, get people through the doors. To do so, they have to shout from the rooftops that they are safe, secure, and willing to lend . A 0.005% ad spend will pay for itself by the end of the month. As a proxy contributor to AIB’s bailout, I wish them well.
2 comments
Before I address your point, can I just say – brilliant picture caption. Hilarious.
Right, regarding the money filtering back into the Irish economy through the newspapers. Interesting take on it. Why filter it through the newspapers though?
Taking a macro viewpoint, which benefits the economy more?
- allowing 6/8 SME access to say, €13,000 worth of capital each.
- purchasing adverts in the major newspapers that will work out at a maximum of 10% or 15% of their advertising total for that week, 10/15% that they presumably were not expecting or had budgeted for anyway.
I’d argue the newspapers could survive for quite a while without the (estimated average) €20,000 each but could the SMEs who were supposed to benefit from the fund?
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Secondly, after the VAT of €28,615 goes straight back into the Irish economy the newspapers are left with €131,970. Of the newspapers involved, all except The Sunday Times are predominantly Irish owned, but The Indo, The Sindo, The Herald and the The Tribune are owned by Sir Tony O’Reilly who doesn’t pay his taxes here. Two of the three most expensive advertisers are owned by Anto so even putting the Sunday Times aside, it’s not all getting pumped back into the economy, although I accept about some of it will by coming through income taxes of journalists, advetising salespeople etc etc.
But once the profit taken by Tony O’Reilly from his four newspapers is removed, we’re down another few grand of (for the sake of argument) taxpayers money. Why? 1 more SME…
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I dont think your argument about “the man who stops advertising to save money is like the man who stops the clock to save time” holds water.
AIB were advertising before they were recaptialised, you’ve seen the bloke on the surf board taking about how his local bank manager understands his business and the horse breeder who goes on about his local AIB branch knowing exactly what is involved in producing the next Shergar.
These print adverts came on top of the campaign they were already running. They could of pulled the TV ads and put up a static or cheaply-shot text-centred ad in their place at no extra cost (or at last not at a cost of €160,585).
Your arguement about it staying in the Irish economy has some merit although I’m sure about the other points. It was still a ridiculous waste of money.
*apologies for how poorly this was written. Just banged it into the text box off the top of my head, haven’t had a chance to sub-edit/re-read.
Mark,
I’m not suggesting newspaper advertising as a new model to save the economy. I suggested that this advertising, while objectionable, wasn’t a 100% net loss to the taxpayer. Obviously SME funding is of more benefit, but this feeds into my previous point, that advertising may help get them in through the door.
The need for advertising suggests that the €3.5bn hasn’t been used up quite yet, and there’s probably some left for SMEs at this stage.
You argument about INM not paying tax doesn’t hold water. INMPLC paid in the region of €33million in tax in Ireland for the year ended 2007. What Tony himself does with his personal affairs is not really relevant.
And as for the advertising – it’s hard to argue with the father of modern advertising.
The print adverts made a very particular point, one you would never make in a TV ad, which are driving brand image and recognition rather than having a direct message-to-consumer focus. The paper ads were a ‘strike while the iron is hot’ campaign, as opposed to a long, slow branding burn.
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