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Digital Marketing as a Capital Expense

As marketing budgets continue to shift to digital channels, and the digital efforts focus more and more on direct response lead generation, there may be an opportunity to treat direct marketing advertising as a capital expense.

What Qualifies as a Capital Expense?

While I don’t profess to be a CPA, and I didn’t sleep in a Holiday Inn Express, make sure you consult your professionals in this area. My professionals provided the following litmus test: The primary purpose of the advertising is to elicit sales to customers who could be shown to have responded specifically to the advertising.

  1. The direct response advertising results in probable future benefits.

  2. There must be a means of documenting customer responses including a record that can identify the name of the customer and the advertising that elicited the direct response.

Check for the SEM, display, and paid social spend. However, it’s not just the media spend, but the following costs associated with the ad campaigns may be able to be capitalized:

  • Incremental direct costs incurred by third parties

  • Costs of idea development

  • Writing advertising copy

  • Artwork

For this post, I consulted Google, but there isn’t a lot on this topic, so I’m curious to hear comments from other digital marketing budget owners if you’re capitalizing your digital direct response costs.

U.S. GAAP Codification of accounting standards – Capitalized Advertising Costs:


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