SUPER DEMAND

SUPER DEMAND
By Pete Lester, Sr.
February 5, 2008

The results are in and in case you did not hear – the Giants won. I am guessing Eli Manning and Michael Strahan will cash in big – Strahan with his contagious smile and Eli with the pedigree – now, maybe we will not have to see quite so many commercials with his big brother.

Speaking of commercials, that is one of my favorite reasons to watch the Super Bowl. Consumers have spoken and the one they liked the best was the Budweiser commercial where the Dalmatian trained the horse to make the Clydesdale squad. I personally liked The Coca-Cola commercial where the Charlie Brown Macy's Day Parade balloon swooped in to steel the Coke. It was good to see one finally bounce Charlie Brown's way without interference from Lucy.

So, what are the economics behind advertising during the Super Bowl? Why is it that each year, brands we already know and recognize spend millions of dollars to advertise during the Super Bowl? Or better yet, why do the newcomers, brands we do not know, spend their entire marketing budget to advertise during the game?

It is the case that in some years, it may not have made sense. But this year, with New England positioned to make a run at history and playing against a team from one of the country’s biggest media markets, the stage was set for an audience larger than in past years – and that is exactly what happened. The estimate is that 97.5 million Americans watched the game. That makes Super Bowl XLII the second most watched TV show in history – behind the finale of M*A*S*H.

Advertisers reportedly paid an average of $2.7 million for a 30 second spot. This was up about $1,000,000 from last year. Other than the game and the match-up between the Giants and undefeated Patriots, what drove demand this year?

First, with the extended writer’s strike, viewership is down across the board for broadcast TV. The Prime-time TV schedule has been decimated by cancellations as we have been forced to watch re-runs. Advertisers hungry to remind people about their products were ready to open their wallets for anything that promised access to consumers.

Second, with digital recorders, we can basically skip through the commercials. The Super Bowl, however, is a rarity. Most viewers want to watch it live, and as such, do not skip through the commercials. True, they may leave the room to grab a beer and some nachos, but according to researchers, they do not change the channel. Additionally, the Super Bowl has become an advertising event. In years when the game offers little excitement, there can be, and often is buzz around a few of the commercials that are aired. For this reason, if you were to TIVO the game, you are likely to still watch at least some of the commercials.

USA TODAY is prompt in reporting which commercials had the best impact on viewers. According to their polls, the top rated commercials were as follows:

• Annheuser-Busch for Budweiser
• FedEx
• Bridgestone
• Doritos
• Bud Light

The least favorable commercials were:

• Salesgenie.com
• CareerBuilder

Proving the point about the popularity of the commercials, in the hours immediately following the game, Super Bowl Commercials received an additional 15 million views online via MySpace.com.

Given the competitive nature of the advertising wars during the game, some say placing an add during the Super Bowl is not worth the potential negative sentiment that could follow – ads are often more harshly critiqued than movies. So, why do companies pay so much and take the risk?

If you were an advertiser and wanted to advertise during a sporting event, what are the substitutes – your alternatives: The Daytona 500, the Kentucky Derby, and The World Series? Here are a few numbers for you:
EVENT: COST/30 Seconds: VIEWERS:
Daytona 500, $575,000, 20 Million
Kentucky Derby, The race lasts about two minutes (1), 14 Million
PGA Major, (1) $200,000, Depends (2)
World Series, $400,000, 17 Million

So, companies have choices with their advertising dollars. They can play on the biggest stage and pay more, or they can take those same dollars and spread them across a number of events. In the end, it is consumers that will decide if the money was well-spent.

(1) Rates can very greatly depending upon the field, the weather across the nation, buzz surrounding certain horses, and for spots directly prior to the race/after the race.

(2) PGA events can be very different, but they also reach a more focused demographic/consumer. Viewership can depend upon weather, who is playing (if Tiger Woods is in near the lead can have a great impact).

QUESTIONS for STUDENTS of ECONOMICS:

1. In general, do you find advertisements on TV interesting or annoying? What types of ads are your favorite/do you remember? Do they compel you to buy more or increase your loyalty to a certain brand?
2. If you watched the Super Bowl, do you pay more attention to the Advertisements or less?
3. If you were an advertiser/brand manager and were willing and able to place an ad, would you place it for the Super Bowl or would you place it across a number of events.
4. Why do you think advertisers place ads during the Super Bowl rather than some other event or events and why is it so much more expensive?
5. How about internet ads, do you pay attention to them at all? Is that an alternative to TV advertising in your mind? Is it less effective or more effective?