A 30 second commercial during the Super Bowl this year cost $5 million. There are several reasons for this lofty price tag. The first is the reach. Over 110 million people watched the Super Bowl this year. To give some perspective, the highest grossing movie of 2016, Star Wars Rogue One, sold 55 million tickets, game 7 of the NBA finals this past year garnered about 31 million viewers, and only 9 million watched the season finale of HBO’s Game of Thrones. This alone doesn’t justify the hefty cost of an ad. Networks and the NFL realize there is something different about Super Bowl commercials than regular ones: people actually watch them. Every other day of the year, people try to avoid advertisements as much as they can. However, 17.7% of adults say that advertisements are the most important part of the event, according to Prosper Insights and Analytics. The advertisements drum up conversation among viewers when they discuss their favorite ones.
When just observing data it is hard to understand how the price could be so high, and how it has exponentially grown. The cost of a 30-second ad in 2007 was 2.39 million, meaning the price has doubled in ten years. The price has gone up by about 60 percent in the past 5 years despite no significant increase in viewership or number of commercials.
Despite the unique features of a Super Bowl ad, it is still rarely “worth” it. The $5 million price tag the network charges doesn’t include the cost to make the ad or drum up publicity to make it a successful campaign. A study by Wesley R Hartmann titled “Do Superbowl Ads Affect Brand Share” found that commercials from common Super Bowl Advertisers, like soda or beer, had a “null and/or insignificant effect” on revenue. Companies realize that they’re paying millions of dollars for something that won’t help the company, so why do they do it? It is possible for companies to receive significant lifts from a Super Bowl ad. The issue is that any market share gains to be made by a company like Coors is going to be negated by another commercial from Budweiser. This presents a Prisoner’s Dilemma for companies: if none advertised during the Super Bowl, they could save millions of dollars and not experience any change in market share. Instead, everyone advertises and significant amounts of money are lost for no reason.
Some companies are using strategies that make the purchase more reasonable. SunTrust is using digital media to their advantage. They created a website that was designed solely because of their commercial where there is a lot more information for a consumer and opportunities to share through other forms of media like Facebook. For example, they can take a pledge to better their financial health and create their own version of the Super Bowl Commercial. Chief marketing officer Susan Johnson said it best: “We’re not launching a product. We need to get people aware of the issue… The best way to do that is through the Super Bowl Stage with the digital wrapped around it.”
This makes a lot of sense for a company like SunTrust, and probably would for many others. However, a lot of the big boys are wasting money for nothing. With $5 million, they’d likely be better off getting a lot of slots elsewhere.
11 Comments
I’ve never really thought about the game theory side of Super Bowl advertisements, but this seems very interesting. Although there are a lot of companies that purchase advertisement space during the broadcast, there are also a great number that don’t. It almost seems to me that the companies who choose to invest in a Super Bowl advertisement do so not because it is necessarily beneficial, but because it simply wouldn’t hurt.
My question is why companies continue to purchase Super Bowl ads despite the disadvantages that so obviously accompany them. If data similar to what is discussed above is easily available on the Internet, it would seem obvious that companies would cease to purchase ads. There must be some befit to the advertising, or alternatively some culture of ignorance within the advertising industry as to the true nature of Super Bowl ads.
Even though the study you mentioned claims Super Bowl ads are insignificant, I would take the results with a grain of salt. While sales might not see a subsequent bump that one would expect from Super Bowl ad, if successfully crafted, these ads go a long way in shaping a companies image and brand. The Super Bowl is the biggest stage out there to send a message to a mass audience. It is the buzz and positioning in subsequent weeks that companies are aiming to gain from a Super Bowl ad, not necessarily increased sales.
My recent paper concerning the beer industry had a lot to do with this exact same prisoner’s dilemma. Research has found that throughout the years, advertising expenditure by major breweries such as Anheuser-Busch has very little correlation with market demand for beer. This presents a prisoner’s dilemma where breweries can choose to drop out of the advertising, but risk being the only ones to do so and as a result see a major drop in sales. The truth is that beer advertising is concentrated entirely intra-market. Most ads are designed to target potential “brand-switcher” consumers, so as a result of advertising breweries will gain firm-specific profits at the expense of the competition.
Neat to focus on the “brand-switcher” story, but are there also adds aimed at current users to confirm (make them feel comfortable) with their choice?
Certainly sports paraphernalia fulfill that function, how about Budweiser logo materials? Do people wear their caps or T-shirts? Or is this reflected more in point-of-sales displays (including at sports bars) and event sponsorship? Or absent?
In terms of its cost, yes, a Super Bowl ad costs $5 million; however, how does that relate to an advertisement on a normal night? As you mention, most popular shows generate significantly less than 10 million viewers a night. Game of Thrones generated 9 million, and that was for it’s season finale. With 110 million viewers, then, perhaps it makes sense for companies to spend 5 million dollars on an advertisement. This ends up costing the company only about 4 or 5 cents per viewer (Forbes). They reach significantly more viewers, and they also generate more press by nature of being a Super Bowl ad. There are many great advertisements that air on television throughout the year, but are often forgotten soon after. Thus, I’d like to know more about the effects that Super Bowl ads have down the road with their enduring popularity.
https://www.forbes.com/sites/jeffreydorfman/2017/02/04/super-bowl-ads-are-a-bargain-at-5-million/#285f5fb02bce
Like you mentioned in your blog post above, companies have begun expanding their advertisement beyond just the super bowl ad itself. I think by giving “teasers” of advertisements on social media sites like Facebook prior to the Super Bowl, the companies are generating more excitement for the commercial itself. This strategy also reinforces the product the companies are advertising, so people are more likely to remember it.
Similar to what Jordan spoke on are the teasers within the Super Bowl ad itself. I imagine companies with vague yet entertaining ads (I’m looking at you GoDaddy) generate a lot of traffic through these sorts of ads on the most watched event of the year. I also wonder how much of advertising is simply trying not lose market share. Especially in intra-markets such as beer and soda.
I know for sure that I almost never pay attention to advertisements if I can, and the Super bowl is the only time I make the conscious effort to analyze and be entertained by commercials. The cultural fundamentals behind the Super Bowl commercials is probably what justifies the high cost associated with commercials in those time slots. There are actually people who watch super bowl just for the commercials, how funny is that? TV commercials have a pretty negative connotation surrounding it, and I believe Kevin is right that advertisement needs to head towards a different direction in luring customers. FB does a pretty subtle job of attracting ad revenue, and they are strategically placed all around the website when you go on it. Similar to Krasner, though, the cultural effect behind Super Bowl commercials must be taken with a grain of salt on their effectiveness.
I think the Prisoner’s Dilemma is the most important reason for why firms continue to get involved in Super Bowl advertising. Although this is an unlikely, almost impossible scenario, I would like to see a SB year where only one firm from each respective industry is allowed to advertise. It would be interesting to compare the results of this experiment with the null impact of advertising in the current conditions. It might give a better indication as to what the true maximum positive impact of advertising would be for one singular firm during the SB.
This very much echoes what we learned in class about advertising in the beer industry: advertising expenditure has no effect on the composite demand function for beer; it merely shifts market shares and increases concentration. When combative advertising becomes excessive, individual firms may advertise to increase their own profitability, but collectively become worse off. However, the enormous expenditure still represents a sunk cost that must be incurred by a firm in order to gain market share, thus while advertising expenditure may not always increase market demand, it still presents itself as a barrier to entry.
Comments are closed.