The Economics of a Super Bowl Ad
ro.co
ro.co
Lets assume that as a media planner, you have the bag of money under your desk to plausibly be discussing buying a Superbowl spot. You are already spending millions of dollars on media every month, the question is - will the Superbowl spot yield more than other channels ?
For some small set of advertisers in this decision matrix, there's also the question of whether the media production cost is worth it (hello coinbase). For the vast majority of decision makers in this position, the media production budget is already getting spent.
Lets say the spot plus extra cost is $10m to use a nice round number.
You have an expectation of how many new users or website visitors your media budget typically delivers for $10m, because you spend that regularly (monthly, quarterly, it doesn't matter, but the point is that your spend has been growing).
So the decision is really really simple. Superbowl or the other places you've been shoving $10m. Sometimes it works, sometimes it doesn't, but usually its like eh compared to the other places you've been shoving your $10m, underwhelming. Which is why you see justification pieces like this.
It seems all guesswork to me. User journeys and decisions are not well enough understood to say, "If I spend $1 here, it’ll return $x".
Of course, marketing people come up with all kinds of calculations to show it’s possible.
That or I’m completely ignorant.
The power of math is its understanding of you, not your understanding of it.
That's how marketing works.
Meanwhile some people complain about space programs etc. wasting money.
(Not taking a position on space programs. Tax-funded programs deserve more inspection than privately-funded programs.)
Let me give you the counterpoint that is increasingly hard to ignore :
You can reach the same users on search and social that the Superbowl will give you and if you can convert them more efficiently, where should your $10m go ?
The newfangled wisdom is that customers are at least as effective branding as the Superbowl
At the same time, we're told that all the sex and violence on TV doesn't matter, because it doesn't change peoples' behavior.
So, which is it? Does what we watch on TV change our behavior, in concrete ways, or doesn't it? I suspect that it does change our behavior, that the advertisers are right. (They're betting a lot of money on their position; I'd expect them to have some basis for doing so before committing that kind of coin.) But if so, then the rest of what we watch also changes our behavior.
And, obviously, so does our social media feed...
It gets discussed for free on HN.
I have no doubt advertising has some effect on consumer preferences. However, I am a skeptic that one more Coke Cola ad aired at the Super Bowl meaningfully changes sales relative to the billions they already spend elsewhere.
It actually might. Coca Cola had $48b revenue last year, or in other words, 4800 millions. Spending 7 of those millions to put your product in front of 100 million people seems like a reasonable bet. If even a couple percent of those people are (sub)consciously influenced to pick up a 12-pack the next time they stop by a store when they might otherwise not have, it would likely be a profitable endeavour given the profit margins on their sugar water.
I think there's also a longer-term status play at stake. If only one of Coca Cola or Pepsi engaged in flashy advertising to this degree, it might give them a slight edge in status perception. In the long term, even an 0.1% shift in consumer preferences between Coca Cola or Pepsi would shift significantly more than 7 million in value. So if one of them engages in this, the other is obliged to follow, in a classic prisoner's dilemma. At any rate, given that 4800 millions in annual revenue translates to 13 million in sales per day, the number paid for that advertisement is a rounding error and doesn't have to move the needle very much at all to be successful.
I also now have a bottle of Lab Cola from https://www.youtube.com/watch?v=TDkH3EbWTYc and it _is_ indistinguishable from regular Coca-Cola to me. So it might be plausible in case of a deliberate Coca-Cola knock-off?
According to who?
I think most colas taste fine but it's not hard to differentiate the ones I've had.
According to researchers who actually ran blinded tests: https://daily.jstor.org/the-coca-cola-wars-can-anybody-reall...
What's funny is kind of the reverse is also true: when people were given the exact same cola but one was labeled Coke and the other Pepsi, not only did they say they preferred Coke, but fMRI brain scans should more prefrontal cortex activation for the Coke as well: https://medium.com/@marketingoal/the-pepsi-vs-cola-cola-expe... . That's the power of branding.
Unfortunately then the question became “well, which do you prefer?” And my answer was “I have no idea”.
Résumé-driven marketing
Super Bowl ads are about brand building. They're not conversion ads. Their direct impact is to reduce CPC (cost per conversion) on other advertising.
Say you have to pay $100 per instagram conversion. Users see your ads cold and need a lot of convicing. Most won't pay attention long enough for your ad to convert. You need them to see a lot of ads.
But after they've seen your brand plastered all over the Super Bowl (and other brand opportunities), those same instagram ads might start converting at $90 per conversion. Users see your ad and go "Oh yeah I remember that brand, lemme check this out"
The brand effect is so strong that displaying a Visa (or Mastercard or Amex) logo near checkout literally increases consumer spend. Study from 1986: https://academic.oup.com/jcr/article-abstract/13/3/348/18224...
Another study from 2015 showing that credit card logos increase estimates of item value: https://www.semanticscholar.org/paper/Effect-of-Credit-Card-...
Notably, the abstract of the 2015 study specifically points out that the 1986 study has frequently failed to replicate, and although it finds an effect, the 2015 study has n = 28. As always with psychology studies, we would do well not to assert their purported findings as facts, as with the statement "The brand effect is so strong that displaying a Visa logo near checkout literally increases consumer spend". Psychology as a field is far too unreliable to make such assertions with confidence.
Pretty obvious gap in the logic to consider only monetary downsides, right before listing all thos non-monetary upsides.
The Superbowl cares more about viewers who don't watch football.
Luckily this time there wasn't much football to watch anyway.
I'm not familiar with American culture, but are the following true?
1. More than half Americans watch it.
2. People don't go to toilet during breaks/ad time.
Otherwise it's just money flushed down the bowl..
There are some people who have more interest in the Super Bowl for the ads than the sport.
So I'd say it's not money flushed down the bowl.
Random fun fact: 20ish years ago, I used to work at a web hosting company that had superbowlads.com (iirc) as a customer. I'm not surprised it's no longer an actual site, though: I speculatively doubt NFL lawyers would've left it alone.
Sorry, but obviously the downside is capped. The downside of virtually any marketing investment is capped at the cost of the media buy...And, the upside being "asymmetric" isn't some saving grace. What matters is the likelihood that you actually realize that asymmetric upside. And, nowhere in the article does he talk about Ro's estimated success likelihoods or actual outcomes.
In short, he's basically saying:
- I made a bet
- It costs me something ("capped downside")
- There's a potential payout ("asymmetric upside")
- I have no idea whether this is positive expected value