The Super Bowl and Advertising: A True Spectacle

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So first of all, LET’S GO PATS. Nothing like bringing home Boston’s 38th professional sports title.

Alright, gloating over, let’s get down to business.

The Super Bowl is a spectacle in many ways. Even in a down year for viewership, over 100 million people watched it in 2019. The halftime show is always over the top as well.

Then there are the commercials. For a 30-second spot in the 2019 match-up, the cost was $5.3 million. After adjusting for inflation, this cost is up 1,600% from the first Super Bowl back in 1967.

The exuberant price tag comes from a combination of two things. First, there is the sheer demand by companies to reach 100 million people at once. No other time in the year provides this kind of marketing opportunity. Second, and stemming from this, there is the inelasticity of demand for getting an ad spot during the game. CBS can charge a significant premium since the big game is a one time opportunity during the year. Demand is not curbed very significantly by price increases as a result of the short window of opportunity.

With such a high price tag, how beneficial is it for these companies to advertise to almost 30% of the country at once? Let’s look at some data.

Using Google Searches as an Indicator

To look at some of the affects of these Super Bowl ads, Google Trends helps provide some insight. Trends allows people to see how frequent keywords are entered into the search engine. Past research from the Centre for Competition Policy at University of East Anglia has shown that these trends can help predict future sales of a product. They specifically look a cars since people research them pretty heavily before a purchase, but still find justification in saying that Google search frequency can be used as a predictor for sales.

With this being said, Trends can help paint a fuller picture of the benefits of costly ad campaigns. Let’s first take a look at the perennial top dog spender: Anheuser-Busch InBev, the parent company of Budweiser and Bud Light. During the 2018 Super Bowl between the Patriots and the Eagles, the brewer spent just about $40 million on add spots alone (this does not even include the cost of making the ads).

How much did this boost their appearance in Google searches? Using Bud Light and its main rival Miller Lite as keywords, Bud was searched at about 3.9 the frequency of Miller during the stretch of 12-30-17 to 1-13-18, about a month before the game. For the stretch between 1-27-18 to 2-10-18, when the game occurred, Bud was searched 6.6 times as much as Miller, close to double the frequency.

With that in mind, let’s take a look at quarterly revenue for Q1 of 2017, when the Super Bowl occurred. Anheuser-Busch saw revenue growth fall about 1.5% a compared with the previous quarter. Molson-Coors, owner of Miller Lite, fared far worse, seeing revenue growth fall 17% and into the negative for this same quarter. In their quarterly report, Molson attributed this drop off partially to “dampened overall industry demand.” Anheuser-Busch appears to have more effectively weathered this weak demand, though, and still posted positive growth and a less dramatic decline.

The $40 million in spending on Super Bowl ads is by no means the entire cause of this difference, but likely played a significant roll in keeping Bud Light and Budweiser on people’s minds during a season of weak demand. In this case, it would appear that the ad spending was worth it.

Ads From Competitors Make a Difference

AB In-Bev has special privileges as being the official sponsor of the NFL and has exclusive rights to national beer advertising during the game. This gives them a distinct advantage over other major beer companies like Molson-Coors since no other corporate brewers can benefit from the 100 million person audience. Without these restrictions, there likely would be less of difference in Google search frequencies and revenue differentials.

This follows in line with research done at Stanford that indicates that the benefit of these ads are best when only one company out of an industry has advertisements. This research even states how Anheuser-Busch pulls in an extra $96 million in revenue as a result of their ads, falling in line with my previously stated revenue differentials.

The flip side to this is when multiple companies of the same industry are advertising, which supposedly weakens the benefit. To look into this, let’s bring in two other heavy spenders from the softer side of the beverage industry, Coca-Cola and Pepsi-Co.

For the 2018 game, Pepsi spent roughly $15 million in ads, topping Coke’s roughly $10 million in spending (again, only money spent on the spots).  Going back to Google Trends, in the 12-30-17 to 1-13-18 stretch, Coke was searched about 2.31 times as much as Pepsi. During the 1-27-18 to 2-10-18 stretch that included the game, Pepsi made some gains with Coke being searched only 1.78 times as much.

Looking at 2018 Q1 revenue growth, both companies saw revenue growth increase by roughly 4% as compared with the prior quarter. Pepsi went from 0.06% to 4.26% growth, and Coke increased from a 20.16% decline to a 16.32% decline. Even though Pepsi outspent Coke and was searched at a higher frequency, their revenue growth still changed the same amount.

This falls in line with the Stanford fellows’ idea of competition making a difference. The higher spending may help on the search engine front, but with a competitor in the mix, neither company is able to gain ground on the other for sales.

Back to 53

Looking at the 2018 Super Bowl, the biggest ad spenders and the competitors who outspent their rivals clearly got the edge in internet attention. The affects on revenues are mixed though depending on if the competition puts out ads as well.

Looking at Super Bowl 53, we can expect a similar trend. Numbers on the amount spent on ads are not available quite yet, but after watching the game, Pepsi clearly put out more content than Coke (and therefore likely spent much more). Looking to Google Trends, Coke was being searched 2.16 times as much as Pepsi a month prior to the game, but only 1.34 times as much for the past week. This is smaller than the 1.78 frequency gap during the 2-week period in 2018 that included Super Bowl 52.

We will have to wait for 2019 Q1 results in March to see if Pepsi’s revenue growth is able to edge Coke’s at all with this larger gap in ad spending. If 2018 is to serve as an example though, do not expect the extra efforts to make too much of a difference.

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