Super Bowl Ads: Are They Effective In Generating Profit?

On February 3, 2008, one of the greatest must-see events in sports history was held in Phoenix, Arizona. Seventy three thousand fans packed The University of Phoenix Stadium to watch the underdog New York Giants face off against the favored and undefeated New England Patriots. These fans were there to possibly witness history (with the Patriots going undefeated) or see the greatest upset (the Giants were twelve-point underdogs) in Super Bowl history. Even though it can be argued as one of the best Super Bowl finales ever (Giants won 17-14), the real show was on television; in between plays, during timeouts, and even through halftime. Millions of people tuned in at home to watch the game, but those record 97.5 million people also witnessed another year of Super Bowl advertisements. One after another, commercials ranging from beer companies to investing firms humored, informed, or shocked a record setting audience. Although some companies believe the ad costs are too high and out of their budget, it is always worth it to have almost one-hundred million people see their commercial, even if it is for only thirty seconds. These thirty-five advertisers negotiated for and obtained commercial time in order to promote their products and services, and the only way to find out if they succeeded is to look at the post-game numbers: stock price and market share.

This year’s Super Bowl ads on Fox had a price tag of $2.7 million for a 30-second spot, compared to $2.4 million last year on CBS. The graph to the right shows the cost per ad and the number of viewers since the first Super Bowl in 1967. Fox generated revenues of over $225 million from advertisements alone. It is no question that Fox came out a clear-cut winner during this year's game, especially with commercials promoting their own TV shows such as Prison Break and Terminator: The Sarah Connor Chronicles. But how did the companies that purchased these ad spots fair, and how do they expect to perform in the near future?

According to the Retail Advertising and Marketing Association’s 2008 Super Bowl Consumer Intentions and Actions Survey, 75.7 percent of viewers consider the commercials entertainment, and the percent of Super Bowl viewers that will tune in primarily to watch these ads is roughly 36.3 percent (see pie graph below). In RAMA’s survey, 18 percent of viewers wish that companies would just save the advertising money spent during the game and use it to pass savings along to shoppers, while 18-24 year olds (12.6 percent) are twice as likely as other groups (6.1 percent) to buy products from Super Bowl advertisers. Year after year, companies such as Anheuser-Busch and Pepsi are frequent leaders in airtime during the Super Bowl. This year, Anheuser-Busch spent roughly $14 million on seven advertisements (they did, however, receive a 25 percent discount from Fox for being the games biggest ad buyer and received one of the few 60-second spots during the game). Some fan favorites, according to MSNBC.com, during this year’s Super Bowl were ads for Budweiser, Tide, Coca-Cola, Pepsi, Doritos, Bud Light, and E-trade. They were an array of serious and funny commercials that people remember once the game is over and even search for online to see again.

Super Bowl ads are expensive to air, but they can also be costly to make. Audi paid $1 million just for the right to use The Godfather imagery in their ad, and other companies spent money getting well-known celebrities to act in their commercials. And every year, Anheuser-Busch shoots multiple ads and spends money to test them in focus groups before they decide which ones to air. One may ask the questions: Do these companies see a dramatic increase in revenues after the game is finished? Why spend so much money on one commercial when they can spread it out for multiple spots during other television events? Although a company should be wise with their marketing funds and spread out their advertisements, using a large portion of their allowance on an event seen around the world is not such a bad idea. Especially since it was the second-largest television event ever seen (second only to the 1983 "M-A-S-H" finale). There are definitely certain aspects of commercials that catch the eyes and ears of the audience and may even influence whether or not its products or services get sold. Celebrities play a huge role in promoting these products or services, as do animals, babies, and well-known fictional characters such as superheroes or cartoon characters. Clever and funny commercials get people talking the next day, which may ultimately lead to searching and re-watching the ads online or even buying the products or services advertised. These big name companies thrive on making decisions like airing an ad on Super Bowl Sunday, and the revenues and profits following this event reflect whether or not it was a good one.

However, the majority of companies that can afford to spend millions of dollars for a 30-second ad are bound to see an increase in sales, according to Chuck Tomkovick, a professor of marketing at the University of Wisconsin. He states that "these companies are getting more for their money than just 30 seconds." He has researched Super Bowl advertising for more than ten years and believes that the internet is a big reason for companies' advertisement success, due to the hype surrounding their ads: "There's an Internet following on these ads and they're being publicized way in advance." Studies have also shown that creativity can even increase stock price and revenues. Kenneth Kim, a researcher at the University of Buffalo, says: "Companies with well-liked commercials see, on average, a quarter of a percent increase in their stock prices the following Monday." While this increase may not seem substantial, the average company who purchases an ad has a market value of $30 billion, and a quarter of a percent of that increases its value by $80 million. Most investors would agree that an $80 million revenue boost is worth the measly $2.7 million spent for a Super Bowl ad.

Not only are beer and car companies are getting into the act, but movie studios are also taking advantage of the Super Bowl ad phenomenon. Research has shown that movie revenues increase an average of 36 percent if their trailer is shown during the game. Another example of a company greatly increasing their profit and market share is Under Armour Inc. The athletic apparel maker who had a 60-second ad during the game stated their market share price climbed about 30 percent after announcing it was advertising a new shoe during the Super Bowl. Tomkovick, who has completed a study on Super Bowl advertisements and the effect they have on stock prices, reported that companies who advertise during the game inflate their stock value by 1.3 percent. However, companies that try to promote beverages and automobiles stay relatively stable with no sudden increase. This can be explained by the demand for these products, which stays constant throughout the year. It is not a guarantee that a company will increase business revenues if they air a Super Bowl ad, but it is a possibility that their stock price will go up.

Year after year, Super Bowl ads humor and inform their audience, which eventually helps the company generate more business. Buying a 30-second spot during the largest sporting event of the year is beneficial to a firm willing and able to spend $2.7 million. This year's game, along with previous Super Bowls, proved that theory. Companies who purchase ad space see an increase in revenues, which may lead to increases in profit, stock price, and market share. The risk is worth the reward, especially with the number of viewers each year consistently breaking records. Fans and non-fans alike are already thinking about next years' game, just so they can see what commercials will stir up controversy or just give them a few laughs.