The average cost of an ad for this year’s Super Bowl between the New England Patriots and LA Rams1 is estimated to be more than $5 million.
That’s an enormous cost for 30 seconds of ad space. It seems insane corporations would spend this kind of money but the data suggests these commercials are worth it in certain circumstances.
Seth Stephens-Davidowitz did a study on Super Bowl movie commercials for his book Everybody Lies. Along with economists from Google and Carnegie Mellon, he looked at every Super Bowl from 2004-2013 to see how well the ads performed. Specifically, they looked at movie advertisements to see if there was a big jump in ticket sales in those cities which had the highest viewership for the game.
The highest viewership tends to come in the two cities represented in the Super Bowl and the research did show the movies received a big bump in those cities following the ads.
And the ads didn’t just work, they were incredibly effective. The average price of for ad space for a movie trailer in this period was around $3 million but the increase in ticket sales was $8.3 million, good enough for almost a 3-to-1 return on investment.
I’m sure you could poke some holes in this study but two Stanford economists found similar results in a separate study.
Wesley Hartmann and Daniel Klapper looked at all the Super Bowl beer and soda1 ads. They measured weekly sales data to see if there was a spike following the Super Bowl by looking at nearly 200 different media markets over 6 different championship games.
They found a 2.5-to-1 return on investment. There were also follow-on effects for those companies who advertised during the NCAA’s March Madness college basketball tourney.
I’ll admit I was one of those people who has always been skeptical about Super Bowl ads. Why would these companies pay millions of dollars for terrible ads?
The obvious answer is hundreds of millions of people watch the Super Bowl and it gives you a chance to advertise to a diverse audience. Price is what you pay, eyeballs are what you get, or something to that effect.
The other takeaway here is that it can make sense in certain situations to pay up for quality.
People love to complain about how bad the commercials are every year but it does appear these ads are more effective than most people would believe.
You may think you’re immune to advertising but that’s probably not the case for most people. The people who make these ads understand human nature better than anyone.
Now here’s what I’ve been reading lately:
- When a hedge fund manager met Jack Bogle (Institutional Investor)
- The man behind one-third of the entries on Wikipedia (CBS)
- The case against value stocks (Validea)
- The futility of market timing (Albert Bridge)
- How much money is enough? (Age of Awareness)
- Blue magic (Reformed Broker)
- How much should you save? (Betterment)
- I guess I’m bearish now (Irrelevant Investor)
1No one asked me but it’s my blog so here’s my prediction for the big game: NE 31, LA 28
2In the Midwest we call this pop.