Why would you pay $7 million for a Super Bowl ad

Sascha: [00:00:02] From Equity Mates media. This is The Dive. I'm your host, Sascha Kelly. One of the most watched sporting events on the planet has just been played. The NFL blown it. 

Audio Clip: [00:00:13] Up, taking a shot, looking for A.J. Brown. He's got it. 

Sascha: [00:00:17] To two tracks, over 100 million viewers in the U.S. alone and a total of 200 million around the world. I know some of them are right here in the Equity Mates office. And there have been a lot of fascinating business stories behind the biggest spectacle in American sports. There's the continued re-emergence of legal sports betting in America, with one in five Americans estimated to bet on the Super Bowl. There is the insights into the music and streaming business that sees Apple Music pay a quarter of $1,000,000,000 to sponsor the halftime show Super Dome. What's great is the two year effort to grow the grass for this year's Super Bowl that cost the NFL $800,000 and the 94 year old groundskeeper that has prepared the field for every Super Bowl in history.

Audio Clip: [00:01:02] George Toma is a legend on the field. 

Sascha: [00:01:05] But we think the most interesting story is the story of the Super Bowl ads. They are a cultural phenomenon in their own right for many people. And I'll put my hand up here. The ads are more entertaining than the game, and there's a good reason for that. A 32nd ad slot will cost you $7 million, so you better not waste your time. It's Monday, the 13th of February. And today I want to know, is advertising at the Super Bowl worth the $7 million price tag? And what do I need to know to convince the team here that we should advertise the dive at next year's game? To do this, I'm joined by the co-founder and my colleague here at Equity Mates Media. It's Alec Renehan. Alec, welcome to the dive. [

Alec: [00:01:48] Sascha, Good to be here. I normally take this day off to watch the Super Bowl, but I'm glad that we're at least talking about it today. 

Sascha: [00:01:54] Well, I'm personally really pleased with your dedication because I'm not necessarily the biggest NFL fan, but I know you're all across this. So, first of all, today's Super Bowl is if I've got this right between the Philadelphia Eagles and the Kansas City Chiefs. 

Alec: [00:02:12] If you would, please pass the point. It is. Tails ten. Nailed it. Yep. We're recording about half an hour before kick off. By the time this is released, we'll know the results, but we don't know yet. It's often called the biggest spectacle in sport. But let's be clear from the outset. It's not the final of the FIFA World Cup attracts up to 1 billion viewers. FIFA claimed it was one and a half billion people watching the 2022 final between France and Argentina. So we can call it the biggest spectacle in American sports. 

Sascha: [00:02:45] So it's not the biggest in terms of viewership, as you've just clarified, but it is the richest sporting event when it comes to advertising. Reports were that a 32nd ad slot during the FIFA World Cup cost half a million pounds in the UK and $600,000 in the U.S. That just pales in comparison to the $7 million price tag. 

Alec: [00:03:05] Yeah, that's right. And the growth in the cost of Super Bowl advertising has been pretty astounding. In 1967, the first Super Bowl ever played, it cost $42,000 to advertise. By 1990, it was $700,000. By 2010, 3 million. Now this year it's 7 million. Even adjusting for inflation, that 1967 ad slot was about $350,000. So after we take inflation out of it, the cost of a Super Bowl ad has risen 2,000% in 50 years. 

Sascha: [00:03:38] So as we try to make the business case for a Super Bowl ad for the dive next year, that's the first cost $7 million for a 32nd ad slot. But we've also got to include in the cost of actually making the ad. I'm not going to get my iPhone or my home video camera if anyone still has one of those. How much am I budgeting for production costs? 

Alec: [00:04:00] Action. So production costs generally add up to between two and a half to $3 million. It does depend on the ad. Coinbase famously last year had QR code moving across the screen for 30 seconds. I don't think that would have cost $3 million. And, you know, Apple probably do do their ads on an iPhone. They probably have that shot on an iPhone. They probably still spend millions of dollars to set it up. But yeah, if we're going to go on for the dive next year, let's budget $3 million.

Sascha: [00:04:28] Yeah, Coinbase, that ad definitely didn't cost 3 million, but I'm sure someone charged 3 million for the idea alone.

Alec: [00:04:34] Yeah, well, then it crashed their website and that probably cost a lot to get that back up and running. 

Sascha: [00:04:40] But there is also a third bucket, which is often the most expensive website crashes aside, and that's celebrity talent. 

Alec: [00:04:48] Hi, I'm Ben Stiller. And I'm Steve Martin. Yeah. 

Alec: [00:04:50] Now this is where the costs add up because Super Bowl ads are a real who's who of celebrity talent. Now, Sacha, rather than just telling you a lot of celebrities that have appeared, I want to play a bit of a game. Can you match the celebrity to the product they endorsed in a Super Bowl ad? So there's two rounds here. I've got three celebrities and three companies. The first round is a little easier. Then we'll have a hot around. So the three celebrities, Matt Damon, Serena Williams and Jennifer Coolidge. The three brands, Elf Cosmetics, Michelob, Ultra Beer, and Crypto.com. Can you match the celebrity with the company? 

Sascha: [00:05:28] Well, Matt Damon was with Crypto.com because that was the fortune. Favours the brave. Right? 

Alec: [00:05:34] Nailed it. 

Alec: [00:05:35] The four simple words that had been whispered by the Intrepid since the time of the Romans. 

Sascha: [00:05:39] Excellent. Now I am going to go Serena Williams with Elf Cosmetics and Jennifer Coolidge with B.O., because I just feel like that's what their identities would align with. 

Alec: [00:05:51] Well, unfortunately, it was Serena Williams with Beyonce. [00:05:54][2.5]

Alec: [00:05:54] And John Serena. [00:05:56][1.1]

Alec: [00:05:56] Williams and Jennifer Coolidge with cosmetics. [00:05:58][2.1]

Sascha: [00:05:59] That came from the sea. [00:06:00][0.8]

Alec: [00:06:01] So I'll give you one out of three there, Sascha. But let's move on to the second round. The three celebrities, Timothee Chalamet. Will Ferrell and Britney Spears. And the brands, General Motors, Cadillac and Pepsi. [00:06:15][14.5]

Sascha: [00:06:16] Well, Britney Spears famously had the Pepsi Tax Day. I really do. I really do. My favourite kind of Pepsi. Pepsi, Pepsi. Not sure that you knew that, but I. [00:06:27][10.7]

Alec: [00:06:28] Yeah, I do now. [00:06:29][1.0]

Sascha: [00:06:36] But she had that iconic ad where she was in a gladiator arena. So Britney is with Pepsi, but the other two are cars and. [00:06:47][10.7]

Alec: [00:06:48] Yeah. Can you split the calibre? [00:06:49][1.1]

Sascha: [00:06:49] I'm going to say Will Ferrell went with Cadillac and Timothy Shanley went with General Martins. 

Alec: [00:06:56] And now Will Ferrell's more of the everyman. 

Audio Clip: [00:06:58] Do you know that Norway sells way more electric cars per capita than the U.S.? 

Alec: [00:07:02] And Timothy Charlemagne is more of the premium brand? Hey, I know. 

Sascha: [00:07:05] What reverse psychology. 

Alec: [00:07:08] But you get you get this sense that there are just massive celebrities being tied up with brands that they have nothing to do with and they get paid millions for these short ads. Here's another question for you, Sascha. A bit of trivia. Can you guess the most expensive celebrity Super Bowl appearance of all time? 

Sascha: [00:07:31] It's probably another sports star I can only think of like Michael Jordan or for some reason, Leonardo DiCaprio came into my head. But I don't know even if either of them have even appeared. 

Alec: [00:07:41] I reckon it's pretty safe to say Jordan probably appeared in an ad and probably one from Nike over the years. You're in the right ballpark with Leonardo DiCaprio. Brad Pitt was the most expensive of all time. In 2005, he did an ad for Heineken. The ad only aired once and he collected $4 million for that. 

Alec: [00:08:03] You can pick me out now. 

Alec: [00:08:04] Brands are reported to spend up to $10 million when they do ads with a lot of celebrities. But, Sascha, I think you'll only need one celebrity in your dive ad. So let's just chuck a couple more million on your budget. 

Sascha: [00:08:18] I can work with that. So when you add that all up, we're talking about a minimum of 10 million and up to 20 million for 30 seconds of exposure on the TV screen. So that's the cost I've got to justify to get my ad for The Dive in next year's Super Bowl. I can get it done. So let's turn to why these ad slots can attract such big dollars, because that is massive money. The viewer numbers, how many people are actually watching. 

Alec: [00:08:46] So there's about 200 million global viewers watching the Super Bowl. About 100 million of them are in the U.S. now in the advertising business. Prices are based on, say, a cost per mile or cost per thousand views. And when prices like that, the Super Bowl CPM is very reasonable. 200 million viewers, $7 million spend, that's $35 per thousand views. Now, for comparison, the median Google search CPM comes in at about $40 per thousand views. So not too bad, but it's a lot of money. And with all these online platforms, your money can go a lot further than on broadcast TV. Here's what $7 million could get you on other platforms. Twitter, 2.3 billion impressions. Instagram also 2.3 billion impressions. Tik Tok, 1.6 billion impressions. And Netflix, who have just launched their advertising, offering 127 million impressions. Interestingly, they're Netflix. Is CPMs actually higher than the Super Bowl? Super Bowl is giving you 200 million. Netflix is 127 million. So the CPM isn't outrageous. It's just with so many people watching, the price tag is quite high. But I guess the argument against these Super Bowl ads is that you can reach more people elsewhere. The argument for these ads is it's rare on these online platforms. You get 30 seconds of uninterrupted attention. You know, most people are scrolling past the Instagram ad pretty quickly. But I guess the takeaway, Sascha, for most of the big Super Bowl advertisers, Pepsi, Budweiser, Toyota, Doritos, they just do both. 

Sascha: [00:10:26] Well, unfortunately, here at The Dive, we don't have that luxury. So I need to understand how this form of advertising compares to all of our alternatives. So let's take a break. And then with big swings, sometimes comes big risks. Let's look at some of the big successes and the big failures from Super Bowl ads from the past. Welcome back to the dive. Before we keep going, I've got a really quick favour to ask you. Can you fill out an Equity Mates community survey? It will take you the time that it takes to listen to the episode. So it's the perfect thing to do as a multitasking activity. The link is right there in the show notes and if you fill the whole thing out, you could win $500 or tickets to FinFest, which is this year on November 11th. A huge thank you from us, from the team. It does give us massive insights into what we're going to do this year. But onto today's topic. Today, we're exploring the business case for a Super Bowl ad, $7 million for the ad space, $3 million for production and up to 10 million for the celebrities to star in it. But surprisingly, the data suggests that's all worth it.

Alec: [00:11:48] Yeah, that's right, Sascha. According to Kantar Research, the 2021 Super Bowl ads delivered an average return on investment of 4.60 per dollar spent. So if you spent $20 million creating a Super Bowl ad, according to Kantar, you should expect $92 million back in more sales, more subscriptions, or whatever it is. Kantar nominated Mountain Dew, Verizon, T-Mobile and General Motors as achieving the best results from last year's Super Bowl. But Sascha, an example of a small company shooting the lights out in 2016, a start up called Death Wish Coffee. The day of reckoning is about. Have you ever heard of them? 

Sascha: [00:12:31] Nope. 

Alec: [00:12:32] Can't say I have ever. 

Sascha: [00:12:34] I also don't really want a death wish when I drink my coffee. 

Alec: [00:12:37] So extreme coffee? 

Sascha: [00:12:40] Yes. 

Alec: [00:12:41] Death wish. Coffee. Add a Super Bowl ad and afterwards, their sales boomed, forcing the company to move into a new space that was triple the size of its existing facility to keep up with demand. That is the potential power of the Super Bowl ad. We might need to move into a studio three times as big. 

Sascha: [00:12:59] Three times the size, three times the vocal power. 

Alec: [00:13:02] But researchers at Stanford University and Humboldt University in Berlin published a study looking at three big brands Anheuser-Busch, Coca-Cola and Pepsi, and found that Super Bowl ads increase revenue by 10 to 15% per household in the following eight weeks. Unless Sascha, unless a competitor advertised during the same game, then those gains turned to losses. 

Sascha: [00:13:30] That's really interesting. So it doesn't always work out. It's not a guaranteed home run. I know that's a different sport, but I'm still using the analogy. Are there any massive flops over the years? 

Alec: [00:13:43] Yeah, there are. And there really hasn't been bigger flops than crypto Crypto.com FDX Coinbase and eToro spent a combined $54 million on commercials during last year's game, and there were big celebrities involved. These ads featured Larry David and Matt Damon, amongst many others. 

Alec: [00:14:04] History is filled with almost. 

Alec: [00:14:07] But Sascha, we know what happened with crypto last year. We know how a lot of these companies turned out. FTX in particular. But I guess the question is, you can't really blame this Super Bowl ads for what happened last year. But unfortunately for those that were convinced to invest in crypto by Matt Damon and these Super Bowl ads, if you'd bought Bitcoin right after seeing one of those Super Bowl ads in February of 2022, you would have lost about 50% of your money from that. 

Sascha: [00:14:34] So like, let's zoom out from our quest to get an ad on the dive for the Super Bowl and talk about where our money will go. Who is collecting all this money? Fox Sports has the coverage for this season and they said they sold all of their advertising inventory. Can we get a rough number of how much total revenue Fox is making from these Super Bowl ads? 

Alec: [00:14:55] Yes. So every Super Bowl since 2003 has had at least 40 minutes of commercials with some games reaching 50 minutes of commercials. So at 32nd increments, that's between 80 and 100 commercials per game, at $7 million per 32nd commercial, let's call it 80 commercials. That's 560 million in advertising revenue at least.

Sascha: [00:15:19] But how much is Fox then, spending to have the rights to the Super Bowl? 

Alec: [00:15:25] Yeah. So Fox and many of the other big networks, NBC, CBS and ABC, pay billions of dollars per year for the slate of NFL games across the year. And then between those four networks, they alternate the Super Bowl. So Fox has it this year, but another network will have it next year. The NFL's media rights deal that they signed in 2021 is worth $110 billion over 11 years. So, Sascha, our dive 32nd ad is combined with billions. Of other ads to make up that number. 

Sascha: [00:16:00] Okay. But let's focus on the part that I love, which is the halftime show. Doubt because it even has its own sponsor. Apple is paying the NFL's $250 million over five years to sponsor that event. There was a rumour that Taylor Swift would be in the running because finally the Pepsi contract, all that rigmarole had been worked out. But Rihanna is the main actress here. I'm excited. How much is she taking her? 

Alec: [00:16:29] Nothing. What Al Rihanna won't be. Well, when people are listening to this. Rihanna wasn't paid a cent for this year's show. And even more than that. Performers often spend millions of dollars of their own money on production costs. It's reported that last year Dr. Dre spent over $5 million of his own money on the halftime show. 

Sascha: [00:16:58] Well, he can afford it. He's got Bates, so, you know. 

Alec: [00:17:01] Yeah, well, a lot of these artists can afford it, but that's not really the point. But this is the biggest concert in the world, and some of the biggest artists in the world have played this stage. Michael Jackson, Bruce Springsteen, Beyonce, Justin Timberlake, the Rolling Stones, Shakira. None of these artists got paid a cent to do it. 

Sascha: [00:17:26] So why do they do it that. 

Alec: [00:17:28] They love football? 

Sascha: [00:17:30] Question That's not the reason. I don't know any of them personally, but that cannot be the reason. 

Alec: [00:17:36] The reason that artists are willing to do this for no money or even pay money to do this is the same reason that brands are willing to pay $1,020 million to produce an ad for this kind of exposure. It's watched by 200 million people, 100 million people in America. And it's a great way to remind people of your music or your brand or whatever you want to tell them. And the numbers in the music world bear out why this makes sense. Travis Scott's performance fee went from $500000 to $1000000 after Super Bowl 53. There's an immediate return on investment there. 

Alec: [00:18:20] Jennifer Lopez and Shakira came 3 million followers after Super Bowl 54 the weekend sold 1 million concert tickets one week after Super Bowl 55. 

Sascha: [00:18:31] So another reason why it makes sense to get The Dive on an ad for the Super Bowl. Oh, maybe we get Equity Mates to sponsor the halftime show and then you and I can just do a live podcast on the screen. I think the production elements might be taking a bit of a step down from Beyonce's amazing show, but I'm sure the 200 people watching it will be stoked to see you and I up there. 

Alec: [00:18:52] I think the NFL gives the artists a 10 to $15 million production budget, you know, to pay dances and stuff like that. Traditionally, they didn't pay dancers, but they do now, you know, all the fireworks and all of that stuff. Imagine what $10 million worth of production elements could do to an episode of the. 

Sascha: [00:19:11] The sound effects would be off the charts. 

Alec: [00:19:16] Sascha Well, we better go and start saving. And I actually want to go and watch this game. So I think let's leave it there. 

Sascha: [00:19:21] Quick reminder, FinFest is back for 2023. Register your interest. Go to equitymates.com and keep that debt free in your diary. It's November 11. If you want to keep the conversation going then email us we're thedive@equitymates.com and hit follow and subscribe wherever you are listening right this second and then you'll never miss an episode. Alec, I'm going to let you go watch the game. 

Alec: [00:19:43] Thanks, Sascha. Go Kansas City.