The Ultimate Indirect Expenditure- Economics of Super Bowl Advertising

The Super Bowl is one of the most significant events in the United States, with millions of viewers tuning in each year to watch the game and the highly anticipated commercials. For advertisers, reaching such a large audience has proven to be a valuable investment- the ultimate gamble in indirect spending, with many companies shelling out millions of dollars to secure a spot during the broadcast. 

But is the investment in Super Bowl advertising worth it? The answer is not as simple as a yes or no. Like any indirect expense, and especially for one this significant, the return on investment (ROI) of Super Bowl advertising is heavily influenced by several factors, including the cost of the advertisement, the target audience, and the impact the advertisement has on the public; however, companies choose to define it. 

Super Bowl commercials are some of the most expensive on television, with 30-second spots costing upwards of $5 million in recent years. While this may seem like a high price, advertisers must consider the large audience that will be reached during the broadcast. With over 100 million people tuning in to watch the Super Bowl each year, advertisers can reach a large and diverse audience, making the investment in a Super Bowl advertisement well worth it for some companies.  

Another factor that affects the ROI of Super Bowl advertising is the target audience. Like any indirect spend category, this may not be as simple as revenue. This is the challenge that indirect spend management seeks to address. 

Advertisers must consider the demographics of the audience they are trying to reach and ensure that their message resonates with that audience. For example, a company that sells beer may want to target a younger demographic and use humor in its advertisement, while a company that sells luxury cars may want to target a more affluent demographic and use sleek, high-end visuals. By tailoring their advertisements to the target audience, companies can maximize their ROI by ensuring that their message is received by the right people. 

In addition to the cost and target audience, the impact of the advertisement on the public is also a crucial factor in determining the ROI of Super Bowl advertising. Brand image, especially to larger companies, is worth a lot in a customer's lifetime value. A successful Superbowl ad may just simply remind people of their preference for the product or service or plant a seed with potential new customers. Advertisers must create advertisements that are memorable, impactful, and leave a lasting impression on the viewer. This is why many companies use celebrities, humor, or shock value in their advertisements. These elements can make an advertisement more memorable and increase its impact on the public. 

While the ROI of Super Bowl advertising is challenging to quantify, the opportunity to reach a large and diverse audience can be valuable for many companies. How do we know this? Prices continue to increase for the ad slots. For some companies, the investment in a Super Bowl advertisement can be a wise move, leading to increased brand recognition, increased sales, and a stronger connection with their target audience. However, for others, the high advertisement cost may not be justified by the return, making it a less attractive investment. 

In conclusion, as is the case of most indirect spend categories, the economics and ROI of Super Bowl advertising are complex and dependent on many factors, including the cost of the advertisement, the target audience, and the impact the advertisement has on the public. While the investment in a Super Bowl advertisement can be a valuable one for some companies, it may not be the right move for others. Since the impact is not always tangible or measurable, companies must carefully consider the cost of the advertisement, their target audience, and the impact they hope to have on the public before deciding to invest in Super Bowl advertising. 

What investments have you made where calculating ROI has been a struggle? How did you make the value case for the expenditure?