Anyone who has ever visited Manhattan will surely recognize the brightly lit signs and billboards that are a hallmark of Times Square. Even if you have never visited, this landmark crossroads is often the backdrop to television or cinema. While billboard advertising has generally declined over the past few decades as multimedia and internet marketing became more prominent, companies still pay out hefty sums to place their ads in this highly coveted intersection. Times Square billboards are not run-of-the-mill printed signs. Rather, these installations are high-tech, glowing bright with LEDs and high-definition displays, captivating and distracting all at the same time.

Advertising in Times Square

Every day more than 360,000 pedestrians pass through Times Square, with still more riding in vehicles. This makes it one of the busiest tourist attractions in the world. The Times Square Alliance estimates that between 40 and 50 million tourists visit the site each year. during the new year/'s Eve ball drop, more than one million people crowd the area. There are also numerous incidental appearances in movies and on television shows, notably, morning talk shows that film out of studios in the heart of Times Square. This makes for upwards of 150 million views, or impressions, per year. A current list of Times Square billboard advertisers can be found here.

It costs between $1.1 and $4 million a year to buy advertising space in Times Square, and many of the electronic billboards feature flashy lights, high-definition LED displays and catchy graphics in order to capture the attention of the people walking below. Taking the average of the cost range and the estimated 150 million impressions a year, the cost breaks down roughly to 1.7 cents per impression. The average cost per impression for a billboard advertisement for the rest of America is much lower, ranging from 0.2 to 0.5 cents. Is putting up an expensive electronic billboard in Times Square nevertheless a cost-effective method of advertising?

Let's see how this cost compares to other forms of advertising. The majority of online advertising platforms, including Google (GOOG) AdSense, on LinkedIn (LNKD) and on Facebook (FB), offer a pricing model based on cost per views or impressions. These cost-per-impression, or CPM systems vary in cost based on a website's popularity and how often ads will be run. Typically CPM counts cost per 1,000 impressions (the 'M' stands for mille, Latin for that number). When using a CPM billing model with Google Adwords, a single impression can cost 0.4 cents, making a Times Square billboard 4.25 times more expensive. Ads embedded in emails like Gmail can cost 0.5 cents per impression and those embedded in videos such as on YouTube can run 2.5 cents per impression. Typically, internet advertising is a lower cost option for advertisers. (For more, see: Google Ads vs. Facebook Ads.)

A 60-second spot during the 2015 Super Bowl cost $9 million and reached a record 114.4 million viewers. That gives it a rate of around 7.9 cents per impression – and for an advertisement only shown once. Advertising during the Super Bowl is over 4.5 times more expensive than advertising in Times Square.

Direct mail advertising still persists even though much of it is thrown away as junk mail. A typical direct mail campaign has a CPM of around 2.7 cents per impression, making Times Square a better deal dollar-for-dollar. 

According to the Outdoor Advertising Association of America, the average CPM rates for other popular advertising media are 1.35 cents for radio, 1.4 cents for magazines, and 3.25 cents for newspapers.

The Bottom Line

Advertising in Times Square, one of the world's most trafficked tourist attractions, commands a relatively high price per impression compared to billboards placed elsewhere in America. Surprisingly, based on cost per impression, advertising in Times Square competes with traditional media, but is more expensive than online advertising alternatives. However, companies that advertise by placing an electronic billboard there are paying a premium the same way that advertisers pay up for big sporting events such as during the Super Bowl. Compared to a 60-second spot during the big game, however, a billboard displayed in Times Square could be a good bargain.

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