Starbucks’ McEarnings

Starbucks surprised Wall Street recently with better than expected quarterly earnings. One of the primary reasons for the uplifting results? The halo effect Starbucks received from the massive ad assault for McDonald’s McCafe brand.

McDonald’s advertising spend increased Starbucks’ sales. OK. A quote from Starbuck’s CEO Howard Schultz, found in this article in AdAge, follows at the end of this post.

This has to be another example of the inefficiency in the current value exchange in the advertising economy. Despite McDonald’s spending $100 million to buy your and my time and attention, we started going to Starbucks more often. We went to McDonald’s for coffee too, so the ads worked, but couldn’t it be better? Couldn’t McDonald’s get more value out of their ads while reduce the value the ads create for their huge competitor?

The ad sales reps at USA Today, NBC, Facebook, et al…the people who got paid a good amount of money for selling $100 million worth of our time and attention to McDonald’s…do you think they remember the ads are from Mickey D’s? Or do they go home to their spouse and say, “I landed some coffee advertiser today…forget their name”.

If the money flowed directly to consumers, maybe we would remember, and be more loyal to, who delivered the message. And the money.

Oh…and Mr. Schultz’ quote on the subject:

“As you know, extraordinary advertising dollars have been spent by fast-food companies trying to attract coffee consumers during this quarter,” Mr. Schultz said. “Many commentators and industry watchers have been concerned that this marketing spend would have a negative adverse impact on Starbucks.” But on the contrary, he said, the “various marketing campaigns,” including Starbucks’ own first branding campaign, have “created unprecedented awareness for the coffee category overall and has actually had a positive result on Starbucks’ business.”