Blog Post
Accounting for advertising
The Most Valuable Expenses You Will Ever Deduct
Advertising Is A Key Driver To The Economy And Your Business.
It Comes Down To Dollars And Cents.
Virtually every business in America relies on advertising to inform potential customers and generate sales.
From billboards to Internet ads, companies promote their products, services and brands. In 2019, the United States spent around $240 billion on generating awareness. Over half of that was on digital advertising.
Advertising Stimulates Demand For Products And Services
There is a very real economic impact as a result of advertising. What happens is that advertising promotes sales. Sales promotes work. Work promotes jobs. And that is good for the economy.
For over a century, advertising has been a regular, deductible business expense under the U.S. tax code. Businesses of every size and scope rely on advertising as a critical ingredient of driving sales.
The IRS describes advertising in their Publication 535, Business Expenses. It states that “you generally can deduct reasonable advertising expenses that are directly related to your business activities.” Yes, that is right. Money spent on advertising your business is often fully deductible on corporate tax returns.
Accounting For Advertising
Things get really interesting in the digital world when we attribute digital advertising dollars to human behaviors. We know where the advertising was spent and we can measure the performance of the different campaigns. Customer journeys can start with advertisements follow this path:
Impressions
Sessions
Goals
Impressions are events when someone has the opportunity to see your message. Think of them as the number of people passing by a roadside sign. People on the road might see the sign. People not on the road never see the sign. Customers can not buy from you if they have never heard of you. Advertising gives future customers the opportunity to become aware that you exist.
Digital advertising allows your message to be seen from millions of websites and millions of mobile phone apps. See our post on contextual placements of ads called “Place Your Brands.”
Sessions are the measurement of people’s behavior - both on the Internet and your website. People react to what they see. Most people will ignore your message. Some people might recognize your brand; and some people will react. They do something. They move their thumb. They click. A click is a behavioral response to an ad and is a demonstration of interest in your message.
Goals are events that we want to occur. Soccer players seek to score goals. Employees achieve goals established by their employers. Digital marketers establish goals for Internet users to achieve. Behavioral goals on a customer journey might include “how long someone listened to a pitch,” or how many web pages they viewed.” Users might download a whitepaper, or participate in survey, or “like” something. There are many behavioral goals that can be measured in the digital world.
Goals give us the ability segment Internet users into highly qualified leads. People who have opted in and invested their time in your brand have earned the right to more of your marketing attention. We offer remarketing solutions
that help companies reach those people who have already visited your website.
Sidebar: Think about your personal experience. Have you ever checked a website before you bought something? People do this all the time. They verify a company is legitimate, they self educate, they engage. These behaviors are leading indicators of a sale.