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The $2.7 Million Question: Are Super Bowl Ads Worth It?

Companies now shell out nearly $3 million for 30 seconds of precious airtime during football's premier event. But in the Internet age, do expensive, glitzy television ad campaigns really work?
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Great Super Bowl commercials are the stuff of water cooler lore, clever ads that generate office chatter the following Monday. For the very best -- the Budweiser frogs, the CareerBuilder monkeys, the FedEx cavemen -- that buzz can last years. For the very worst, it's an easy way to waste $2.7 million in a mere 30 seconds.

Since the first big game in 1967, when the Kansas City Chiefs faced off against the Green Bay Packers, the Super Bowl has become one of the most watched television events of the year. Today, about 40 percent of all U.S. households -- 90 million people -- sit down to watch the whole game, while about 140 million people tune in for at least part of it. And for many non-football fans, watching the much-hyped commercials has become as much a spectator sport as the game itself.

A commercial during Super Bowl I cost around $40,000. Two decades later, following Apple's groundbreaking "1984" commercial, ad prices began skyrocketing, and reached $600,000 by 1987. Today, one 30-second spot costs around $2.7 million. Fox, which will broadcast this year's game featuring the New England Patriots and New York Giants, reportedly sold out of ad inventory earlier than ever. In a TiVo world where many viewers fast-forward through commercials, analysts say, a growing number of companies are jumping at the chance to advertise to an audience actually eager to see their spots.

"The venue not only delivers a vast audience, it delivers a captive audience that often pays more attention to the commercials than the game itself," says Richard Castellini, vice president of marketing for CareerBuilder.
 
But in the Internet age, with a slew of new media competing for people's attention, is a glitzy, expensive, high-profile advertising campaign the best way to generate that elusive buzz? Well, it depends.

For Go Daddy Group, a former Inc. 500 company that offers domain name registration and Web hosting services, risque Super Bowl ads have vaulted itfrom relative unknown to household name. Go Daddy's 2007 Super Bowl ad, which featured a wild party in the company's marketing department, was ranked by IAG Research as the "Most Recalled" commercial for the entire year.

"Back in 2004 [when the company launched its first Super Bowl ad], we had the very best program of everyone we were competing with, but market share just wasn't growing enough," says Go Daddy CEO Bob Parsons. "A marketing firm said, 'Nobody knows that you exist and you should consider stepping into the mainstream media.' And the Super Bowl was right around the corner."

And so began Go Daddy's Super Bowl campaign which, in just the first year, helped boost market share from 16 percent to 25 percent. The following years, as the company continued to create Super Bowl ads, market share jumped to 32 percent in 2006 and 42 percent in 2007.

Parsons likens a big budget ad campaign to golf. "First you have to tee the ball up right and then you have to hit it," he says. "The Super Bowl teed up those customers for us and then we hit it."

But Parsons concedes that spending nearly $3 million for 30 seconds of airtime can be an enormous risk for a fast-growing company. "If [anyone does] a Super Bowl ad, they should be in a financial position that if the ad didn't work, it wouldn't affect the business," Parsons says. "We were in that position in the first place."

Even some companies that have the money in their budget generally proceed with caution. Whitepages.com, a former Inc. 500 firm with annual revenue of about $62 million, has not ruled out the possibility of doing a Super Bowl ad -- but not until the company can actually benefit from such a big investment.

"You have to have a very good understanding of brand before you do something of that nature," Whitepages.com's vice president of marketing John Lusk said, noting his company's own brand is still evolving. "A growing company is constantly trying to reinvent itself, and with that, you're always reassessing who you are. So for us to spend $2 million telling people who we are and knowing that that could change in nine months is a big waste."

In the meantime, the company is channeling more of its money in pay-per-click advertising with Yahoo, Google and MSN.

"Our background, that scrappiness culture really sticks with you and it forces you to better understand where to get the best bang for your buck," Lusk adds.

Investors are perhaps even more skeptical. On Jan. 18, sports apparel maker Under Armour, also a former Inc. 500 company, saw its stock plummet from $42.08 to $29.80 a share -- following an announcement that the company would spend an estimated $5.4 million on a 60-second Super Bowl ad for its new cross-training shoe. "The Super Bowl is three months before the shoe launch, and I'm just not sure that collective memory will hold the shoe in their heads for that long," Matt Powell, an analyst with SportsOneSource, told the Associated Press at the time. "It really will depend on how memorable the spot is."

For some companies, a Super Bowl commercial may not be the most cost effective way to spend that much money. Douglas Dotterweich, an East Tennessee State University economics professor who has studied Super Bowl advertising, found that during the 2003 game, ads reached 22,000 households per dollar spent. In comparison, ads that ran during the popular show Friends in that same year reached 45,000 households per dollar spent. The NBC sitcom averaged more than 16 million viewers per episode that year -- far fewer than the Super Bowl, of course, but the ads also cost a lot less.
 
According to Dotterweich, smaller companies in particular, who have a more complex message or product, may find little benefit from Super Bowl ads at all, since consumers typically need to see a commercial three times before it actually affects buying behavior.
 
"Brand familiarity is a very important point," Dotterweich says. "With Super Bowl ads as expensive as they are, a company may not be able to afford multiple ads."

And while tens of millions of people watch the Super Bowl, the demographic does skew toward males between the ages of 20 and 50, according to Dotterweich, meaning that not all companies would benefit from a promo during the big game.

That is something that Eric Klose, vice president of marketing at CSN Furniture, a Boston based company that primarily targets women through its advertising, is acutely aware of. After conducting a "rigorous case study" about the potential benefits of a Super Bowl commercial, Klose says the company eventually tossed out the idea.
 
"When evaluating the Super Bowl ad, it's about 'What's the best use of that money?" Klose says. "We would be more inclined to invest that money in our service."

Any high-profile advertising campaign can be a gamble, Klose says, and companies need to zero in on the message they are trying to deliver -- and whether an event like the Super Bowl, with its hefty price tag, is really the best venue.

"It might be a flash in the pan," Klose says, "or it might be the kickoff to get your company out there in the national arena."

Last updated: Jan 31, 2008




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