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Do Super Bowl Advertising Dollars Make Sense?
The Super Bowl is traditionally the biggest television event of the year. With that kind of spotlight shining, it has become a showcase for advertisers to reach this huge audience. Last year, the sting of the recession prompted advertising prices to fall marginally. This marked only the second time in the game’s 44-year history that this has occurred. This year, under slightly brighter economic skies, the cost of running a 30- or 60-second ad has once again risen. Early indications are that the 30-second variety are averaging about $3 million for the game, which will be played on Sunday February 6th from Cowboy Stadium in the heart of the Dallas-Fort Worth area.
The estimated worldwide audience for the game currently sits at one billion viewers. Roughly 150 million of these will be watching from within the confines of the United States. The game has taken on a larger-than-life mentality and it has become a party that everyone is invited to and few want to miss out on. It is this mindset that makes the game so appealing to corporations. Even those casual fans who are not overly interested in the outcome, watch the game in its entirety. In fact, some advertising surveys have shown that two-thirds of the respondents remembered their favorite commercial, but only about 40% could recall the winning team.
With that said, a company that is just launching, or coming out with an entirely new product line, could use this giant platform to get its name out there on a global scope. Additionally, a firm in transition, or one looking to make a mea culpa for sins of the past would certainly want to capitalize on this type of audience. The former description fits budding entities well and that is why we find several dotcoms among the roster of advertisers already signed on for the game. Godaddy.com and Cars.com lead the Internet list. Elsewhere, Skechers (SKX) and Kia North America, which are much smaller brands in their respective industries, could benefit greatly from the added exposure this event brings. Too, Yum! Brands’ (YUM) Pizza Hut, which is in a battle for market share versus Domino’s Pizza (DPZ) and Papa John’s (PZZA), will air clips of how it plays a role in consumers’ lives. This strategy has paid off for many companies in years past.
For corporations of that nature the idea of “getting their name out there” seems like a no brainer. But, what about popular global brands whose names are already recognized throughout the world? Is it really worth it to lay out $3 million for 30 seconds of time?. We are inclined to think it is definitely not. Anheuser-Busch InBev (BUD) is the first company that comes to mind. The brewer typically buys between three and a half and five minutes worth of commercials in the Super Bowl each year. This year, it is allegedly on board for eight 30-second spots. It’s Bud and Bud Lite lines will be the focus as has been the case for several years now. Although these commercials are often the most memorable due to their comedic bent, are they really going to have a positive impact on the company’s results? Do many beer-drinking viewers see these ads and switch their allegiance? Again, the answer is probably no. Skeptics will say what is the big deal? It is “just” measly $24 million out of Anheuser’s coffers, but the company is already the number-one beer worldwide and we think the funds would be better spent elsewhere.
The same can certainly be said for Coca-Cola (KO - Free Coca-Cola Stock Report). This soft drink is already as American as apple pie, and sitting out this game will not change that. To its credit, it does use some of its spots to promote new twists on its original formula drink that have had trouble gaining traction. These moves could pay dividends over time. Still, it should be noted that Coke had taken a hiatus from Super Bowl advertising and only resurfaced on this stage in 2006. While not doing commercials in the game the company’s results were not materially hurt. It got back in the game when rival PepsiCo (PEP) stepped up its efforts in this field. This entity has boosted its expenditures this year in order to push its PepsiMax and Doritos offerings.
It is highly likely that these companies only advertise during the big game as some sort of status symbol among Corporate America’s heavy hitters. If that is, indeed, the case, we think executives could find much better use of this cash. Placing shareholder’s best interests ahead of “keeping up with the Jones’” would be a good game plan.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.