Historically, the best commercials you will ever see will be on Super Bowl Sunday. In fact, they are so popular that many people watching the game (non-NFL fans) are more interested in the commercials than the game. These commercials also make for excellent conversation starters. The bad news is that in most cases, these commercials are forgotten about after a few weeks. This begs the question: Is a Super Bowl commercial worth the $5 million that's rumored to be the price of a 30-second spot?
A Worthwhile Investment?
There is no concrete answer to this question. On one hand, the Super Bowl has more exposure in North America than any other event in the world (over 110 million viewers last year) and will be watched live by most. On the other hand, that $5 million price tag is really much higher due to production and publicity costs. Some estimates are as high as $30 million, but this will depend on the advertiser and their strategy.
It would be easy to ascertain that everything would need to go right for the advertiser to see a positive return. This could relate to how well the advertiser builds interest for the ad via social media, or simply how well the ad resonates with viewers/consumers. The big problem for new advertisers is that a consumer must see an ad seven times before it resonates. Therefore, taking a gamble on a one-shot Super Bowl appears to be high risk. However, for companies that have a ton of capital, such as PepsiCo, Inc. (PEP), Super Bowl ads can pay off because they act as reinforcements. For example, PepsiCo owns Frito-Lay, and plenty of capital is being spent on Doritos. This has long been a household name, and $5 million is nothing for a company that has generated $10.59 billion in operational cash flow over the past year and has an additional $10.68 billion in cash available. (For related reading, see: Super Bowl Ticket Prices Set New Records.)
Another dilemma for most Super Bowl advertisers is competition. For instance, it’s going to be extremely challenging for a new advertiser with less capital to stand out versus a larger company with a lot of capital. The latter will have an easier time hiring the best talent, or marketing an idea that leads to a lot of potential.
Currently, only Super Bowl teaser ads are available. I watched all of them, and while it’s difficult to tell which ones will be the most memorable due to short running times, there are a few that run longer and stand out in a positive manner.
Super Bowl Teaser Ads
I’m not going to go through every teaser ad here, just the ones that stood out.
Amazon.com, Inc. (AMZN) has two ads going. One of them features former Miami Dolphins quarterback Dan Marino and actor Alec Baldwin. It’s geared toward Alexa (and Amazon’s could-based voice-activated Echo device). More importantly, Amazon is yet again increasing exposure for another revenue stream. It’s important that investors realize that Amazon is not just an online retailer, but a highly innovative company that is consistently going to find new ways to drive its top line. (For related reading, see: Amazon's Bad Quarter; Why You Shouldn't Bet Against Bezos.)
Regarding PepsiCo, there were three finalists for the Doritos “Crash the Super Bowl” ad contest. This included Ultrasound, Swipe for Doritos and Doritos Dogs. Ultrasound might be the funniest. If it wins the contest, it could be the hit of the Super Bowl. Either way, Doritos will remain a household name.
Intuit Inc. (INTU), maker of Quicken and TurboTax, has an ad that somehow combines Vikings and coffee. This is a good time to mention that Intuit’s non-Super Bowl ads are resonating well with consumers. This ad campaign is designed to show the “incredible simplicity” of filing your own taxes. It’s only that simple if you’re in a simple situation, but the ads have been effective nonetheless.
SunTrust Banks, Inc. (STI) will advertise during the Super Bowl for the first time, featuring an ad related to holding your breath underwater and controlling your finances.
Ironically, SoFi — the anti-bank — will also have an ad. This ad seems pretty powerful and makes a hard-hitting point, which is that banks are “Too big to fail, and too big to succeed.” (For more, see: 10 FinTech Companies to Watch in 2016.)
On the private company side, Marmot, an outdoor clothing and sporting goods company, has a few funny spots.
There isn’t enough information on the other ads to mention them; there could be a big winner that hasn’t been mentioned here.
The Bottom Line
Super Bowl ads are probably not worthwhile for companies that are first starting to gain exposure. That capital can likely be spent in much more effective ways because of repeat exposure. However, Super Bowl ads are likely to be effective for larger companies that are using the Super Bowl to remind consumers about their great products, especially since a $5 million spot will have a minimal impact on their financial situation. (For related reading, see: Top Super Bowl Ad Spenders in the Last Decade.)
Dan Moskowitz does not have any positions in any of the stocks mentioned above.