[Retric]

Let's say Cisco spends $1B on advertizing and ends up with an extra 800M in sales and $900M in profit after taxes. Was that a good idea?

PS: The actual numbers may look like this. By selling more units your price per unit usually drops. But, sometimes it's better to sell fewer things at a higher margin. For a company like Cisco maintains a specific brand image is worth a lot. They may sell cheap home networking equipment but they don't use the Cisco brand.

[jacquesm]

Obviously not, but the argument was made that because advertising is tax deductible that it was essentially free. Nobody talked about the effective result of the advertising on the bottom line because of the extra revenue that it might bring, or how bad it would be to advertise ineffectively.

[Retric]

Obviously not err my point was 1B in pretax money is generally worth significantly less than 900M in after tax money.

Clearly it's not free, but due to the tax break advertizing can have a lower ROI and still be a better investment.