Everybody knows that Super Bowl advertising is expensive. Last year at Super Bowl XLIX the cost of a thirty-second television ad was $4.5 million, or $150,000 per second. Prices have been rising every year, and as such, the cost of this year’s advertising will obviously be higher. However these costs don’t deter big companies, especially beer companies, from purchasing single, multiple or longer adds. One ad for Budweiser was three minutes and eight seconds long. Going by the above rate, that’s around $28 million (this probably isn’t the actual rate or cost). But are these costs worth it? Does the boost in potential sales offset these large costs of advertising? Or is there something else in play?
First, it should be noted that the price of the ad itself is not the only cost associated with high profile advertising. Companies have to produce the ads as well as pay any potential celebrities who appear in them. Everything about an advertisement, regardless of the time of year, is appeal. Celebrities increase the appeal factor, but also the cost. The $4.5 million ultimately is only another layer to the process. In AB-Inbev’s own words, their Super Bowl ads were “star studded”, which means an ever-higher cost.
During 2014, AB-Inbev had revenue of $47,063 million and a gross profit of $28,307 million. Sales and marketing expenses totaled $7,036 million, or 15% of revenue and 25% of gross profit. SAB Miller in the same year had revenues of $22,130 million, $3,557 million in profit, and $2,428 million in Sales and Marketing costs. Both companies make large sums of money that clearly cover all expenses, not just those of advertising. And, given the fact that advertising is a sunk cost, AB-Inbev and SAB Miller are anticipate these costs. The expenses related to advertising, both at the Super Bowl and in general, may or may not outweigh the potential gains of saving the money by not advertising, but to companies with multi-billion dollar revenue streams, a few million dollars is not that much.
Although not indicative of broad market conditions, there are small samples that show that advertising during the Super Bowl can increase sales. During the 2015 Super Bowl, immediately after Budweiser’s puppy and Clydesdale commercial, an app that allows one to purchase beer and other alcohols sent out notifications to those with the app promoting the sale of Budweiser. Order volume of Budweiser through the app increased 500 percent over the previous period, and dollar sales rose 650 percent. App use increased 400 percent within ten minutes of the ad airing.
There are other reasons to advertise at the Super Bowl. The most important is the extremely large audience size. At no other point in the year will as many people see an advertisement, therefore the costs of Super Bowl advertising may be mitigated when accounting for the efficiency of the adds. Advertising is also one of the few ways that companies can attempt to differentiate overwhelmingly similar products. This is seen primarily with lite beers. Large beer companies also expect their competitors to advertise heavily, and if they don’t follow suit, they may fall behind. The Super Bowl is only a focal point of these larger market concerns.
In short, the empirical benefits of advertising at the super bowl are difficult to discern, however, based on other factors, advertising is a must. Budweiser commercials are almost synonymous with the Super Bowl. I would say that in the grand scheme advertising at the super bowl is a win for those who choose to invest in it. Bud light and Coors light are the two largest beer brands in America by sales. They also are two beer companies that advertise the most during the Super Bowl.