I don't think there has to be merely one single solitary reason for the popularity of diamonds. Whenever you see profound effects (in this case, a massive number of people people grossly overpaying for a useless rock), it's worth considering the possibility that you have several strong forces all pushing in the same direction. In this case, yes, advertising doesn't hurt. But there are plenty of other factors that may be contributing:

Social Proof, Envy - You're 28. Many of your good friends are married or engaged by now. All of them got diamonds. Your mother got a diamond. Your sister got a diamond. All of your celebrity idols got diamonds. Surely, it's a normal thing. There's nothing wrong with you wanting one, too, right?

Doubt, Insecurity - You're dating the man of your dreams. You love him and want to spend the rest of your life with him. Marriage is a big step, and you want to know he's committed. Sure, diamonds are useless and overdone, but it's expected of him to get you one. And a big one, too, if he can. You know it. He knows it. So if he doesn't, surely it's a subtle way of him saying, "You aren't worth it."

Fear of Loss - You've been looking forward to this your entire life. By the time you were old enough to consider the possibility that diamond-giving is a dumb and arguably immoral tradition, you'd already spend 15 or 20 or 25 years wanting one. You'd already accepted that you would get one. The fear of loss is a powerful force, even when you're "losing" something you don't have yet.

Inconsistency Avoidance - Refusing to accept a diamond would undoubtedly and repeatedly put you in the position to explain yourself. In a way, it's a silent judgment of all those who do accept diamonds. You've never denounced them in the past. In fact, you were right there with all your friends joking about how big of a rock you'd get some day. So denouncing them today will seem inconsistent, and you don't want to be inconsistent. Nobody does. (If you doubt this this a major psychological factor capable of influencing behavior, read Cialdini's "Influence".)

Etc.

Advertising spend in and of itself isn't a reason people buy things. Nobody ever said, "I want a Coke because Coca-Cola spent $3B on marketing this year." Instead, people want things for primarily carnal and psychological reasons. Because it's hot outside and you know Coke is cold. Because you're craving stimulation and you know carbonation tickles your mouth. Because you know your friends with their big expensive rings will think less of your relationship if you don't get one, too.

Good marketers understand human psychology and play to its weaknesses.

csallen, thank you for thinking of making a list! I do have one or two more reasons to add to your list.

1. Cognitive dissonance reduction: he spent so much, so to avoid cognitive dissonance he's going to tell himself she's worth it. Helps keep marriages together. It is the same reason that hazing ritual happen in college and why secret societies have all sorts of strange initiation rituals, often hazardous or difficult. - Easy way to test this would be RQ: Do couples with relatively more expensive wedding rings for their income level(s) stay together longer than those who spend less on their wedding ring (controlling for other initial ritual costs like the wedding, although I suspect similar effects and interactions there).

2. Symbolic Interactionism This suggests that the initiation rites are there precisely to bind people together socially. It's a social-level theory explanation for all of the rites of passage rituals which are common in mating-couple pairing cultures in humans (and probably other primates, for that matter). A big token like this is a constant reminder of the commitment, and the meaning ascribed to this again helps with the ongoing project. If course this is entirely consistent with the marketing phenomenon, as it's more of an anthropological descriptive approach.

3. and oh... Shiny!

In graduate school, I took a class on evolutionary biology. One of the principles put forth was that women (think cave women) evolved to focus on seeking a mate that provided time and resources because women are more focused on the long-term reproduction strategy of investing in their offspring and want a mate to help maximize their success (i.e. that offspring surviving to reproduce). Both men and women were shown to engage in both short and long term reproduction strategies of sorts. Men sleeping around (short term) and supporting a child (long term). Women supporting a child with a mate's help (long term) and sneaking out on mate to have sex with genetically superior mate (short term). One of the supporting studies showed that in a list of things that would most anger a man or women relative to their mate, men rated sexual infidelity as number one (this is in part because men have paternal uncertainty and their worst outcome is investing in the long term strategy of raising another male's child). Women listed sexual infidelity as somewhere in the top few, but number one was their mate spending time/money/resources on another woman. For example, imagining their guy taking another woman out to dinner, spending time and thought on her, buying her a gift, etc. upset them more than the thought of him simply have sex with a women he wasn't otherwise invested in. Within this theory, an expensive diamond communicates that the male is making a large investment and communicates to other women that the woman with the diamond is worthy of that large investment. In real life, women of course range from "don't care or think that way" or "achieve that validation through non-material means" to "totally obsessed with sucking material goods and services from a man and showing that off to other people (mostly women). It was an interesting course and study.

An anecdotal data point: a friend used to work with a man who had married right out of high school, as had most of his classmates. At that point, probably 15 or 20 years out, this marriage was one of the few still intact. The man's observation was that in this group, the length of marriage was inversely proportional to the cost of the wedding.

Another anecdotal data point: When I married, I was working as a low-level reporter for near minimum wage. We married at a city courthouse and had a reception in the living room with my housemates who happened to be home at the time. I didn't buy a rock of any sort, though I gave her a plain gold wedding band I got from an estate sale. She gave me one she bought for $70 at a jewelry store.

That happened thirty years ago and we are still happily married with three kids, two of them in college right now and one in high school.

I think your second point is the most salient.

Advertising does one thing, and one thing only: create symbolic associations. (Well, I guess web ads are a departure, since the goal is a click).

What does Coke's advertising budget actually pay for? Images of people having fun and drinking Coke, which are then distributed through every media known to man. Three billion just for Coke = fun, popular. Think about that for a minute, and you'll recognize it's almost impossible to comprehend how intimate symbols really are, how they turn something intangible into something real that you can buy.

Now let's look at the diamond. In my opinion there is only one association that actually drives the purchase. Diamond = marriage. And not just marriage. The loving side of marriage, the tender and personal one as opposed to the banal legal one symbolized by a certificate or the familial one symbolized by the ceremony.

You can come up with a story as to why you don't have one, but there always must be a story. The diamond needs no story, because it's already a symbol. I'd love to see some examples of the early advertising campaign the article discusses.

Does "I'm not stupid enough to pay insane margins on a worthlessly common piece of rock." count as a story? It sounds more like a statement of fact to me.

Another way of thinking about it is the age old saying:

'Blood is thicker than water' when referring to family over people you encounter.

Beyond the shared experiences and the irrational bond (I use the phrase as devil's advocate whilst being happily irrationally bonded with my family), there's not a lot to prescribing value to familial relationships over other ones.

We prescribe irrational value to diamonds, because offering a big rock to a bride in front of our family imbues value beyond the intrinsic worth of the rock.

All good points. I think the real takeaway here though is if the price of a diamond really floated to its fair value, we'd be buying rings with something else on them. Which satisfies most of your list, but in addition, it would be more rational because what you buy could actually be justified as some sort of investment and not merely burning your money in essentially a grand century long con job.

Imagine instead buying a plastic ring for your beloved which would have engraved the account number and sum total of your engagement 401k you bought for the love of your life.

Why do you think your argument contradicts the claim that it is about social status?

Diamonds are a sign of social status in large part because De Beers marketing has convinced them (and their friends) that it is a sign of social status.

The connection between diamonds and social status in this case is supporting evidence for the assertion that "advertising works".

Coke plain tastes better. They spend millions on research getting the taste just right. Most store brand colas have one overpowering flavor that ruins the experience.