Super Bowl ads: $2.7 million and worth it
The big game will showcase the most expensive commercials of the year. And despite the cost, experts say Super Bowl ads are still a good buy.
NEW YORK (CNNMoney.com) -- One week from Sunday, the titans of American advertising will take to the field and go head-to-head in an epic battle of marketing muscle to determine who will be the king of commercials.
Oh, and there will be a football game too.
As most sports fans already know, Super Bowl XLII is game day for the Giants and Patriots, but it is also the biggest advertising event of the year.
Last year, the big game was the highest rated TV show in the U.S. with more than 93 million people tuning in, according to Nielsen. And this year, with two teams from huge markets competing, the Super Bowl could draw even more viewers.
Not surprisingly, companies like Anheuser-Busch (BUD, Fortune 500), General Motors (GM, Fortune 500) and Pepsi (PEP, Fortune 500) are spending millions of dollars to get their marketing message to this massive audience.
The average cost for a 30 second spot during this year's game is $2.7 million, according to Fox, the News Corp (NWS, Fortune 500).-owned network that will broadcast the Super Bowl. That's up slightly from last year when the going rate was $2.6 million and more than double the 1997 price of $1.2 million.
However, the ever-increasing price tag has not hurt demand for Super Bowl spots, according to Lou D'Ermilio, senior vice president of communications at Fox Sports.
D'Ermilio said last week that Fox had only one available spot left for the game and that the Super Bowl was 90 percent sold out by the first week of November.
Great bang for the buck. So what makes a Super Bowl spot worth such a sizeable investment?
"It's all about value," said Michael Pavone, president of brand consulting firm Pavone, the group behind spotbowl.com, a Web site that analyzes Super Bowl advertising.
"There's no other venue that gives your brand that kind of instant Americana," Pavone said of the Super Bowl.
In recent years, Super Bowl commercials have become a cultural phenomena, with more than half of the audience tuning in just to see the ads, according to Pavone.
What's more, the popularity of Super Bowl spots makes anticipation of the ads almost as valuable as the commercial itself.
"The Super Bowl is a good spend because you get the chance to create a lot of buzz ahead of the game," said Tim Calkins, a clinical professor of marketing at Northwestern University's Kellogg School of management.
Expect more interactive tie-ins. To that end, the Internet has played an increasingly important role in Super Bowl advertising, with many companies leveraging their spots to drive viewers to their Web sites before and after the game.
"I suspect that there will be a trend towards interactive ads," said Rick Gentile, a professor of sport management and director of Seton Hall Sports Poll. "The web will rear its head somehow," he added.
But the buzz doesn't have to end once the game is over. Steve McKee, president of McKee Wallwork Cleveland Advertising, points out that with a spot in the Super Bowl, advertisers can see big benefits the day after the game.
Last year, Super Bowl advertisers saw a collective 50 percent increase in Web traffic on the day after the big game, according to the Nielsen Company, a global information and media firm.
Oscar jitters fuel Super Bowl prices? Another factor fueling demand for Super Bowl spots this year that hasn't played a role in previous Super Bowls is the fallout from the ongoing writer's strike.
Since the strike could cause a cancellation of the Oscars, one of the other major advertising events of the year, many marketers are looking at the Super Bowl as the single biggest opportunity of the year.
"Everyone is nervous about the Oscars, which makes the Super Bowl even more important," Calkins said.
Recession fears weigh on marketers The faltering U.S. economy has caused at least one company to express concern over the viability of its Super Bowl spot.
Hyundai Motor Co (HYMT.F), said last week it was reviewing its decision to advertise in the Super Bowl based on signs that consumers are becoming more wary of spending. The company ultimately decided to stick with its plans and will have two spots during the game.
But athletic apparel maker Under Armour Inc. (UA) upset investors last week when it announced a new brand campaign -- including a 60-second Super Bowl spot -- and said that marketing expenses will represent as much as 13 percent of the company's 2008 net revenues.
This prompted a Wachovia Capital Markets analyst to downgrade the stock due to concerns that the company was spending too much during a time of economic weakness. Shares tanked 24 percent over the next two days before more favorable research reports from Goldman Sachs and Susquehanna helped the stock recover.
An ad you can't refuse Investors may be concerned about the cost of a Super Bowl spot for a relatively small firm like Under Armour. But for larger companies, such as German automaker Audi AG, a subsidiary of Volkswagen Group (VLKA.Y), buying a 60-second ad to tout its latest high-end sports car is not a problem.
The highly publicized ad, which reimagines the classic mobster film "The Godfather," is designed to represent Audi as a "new force in luxury," according to an Audi press release.
Scott Keogh, chief marketing officer for Audi of America, thinks advertising in the Super Bowl is still a "great value" despite recent declines in consumer spending.
"Strategically, it made perfect sense," Keogh said about the company's decision to buy the spot. "Audi is known as an insider brand and the Super Bowl is a great way to let a broader segment of America know about it," he said.
Skipping the big game One notable absence from this year's roster of Super Bowl advertisers is insurance company Nationwide.
Nationwide has run Super Bowl spots in the past featuring offbeat celebrities like Kevin Federline and Fabio. The company has maintained that last year's K-Fed spot was a financial success for the company.
So why isn't Nationwide in the game this year?
"It wasn't a financial decision," said Steven Schreibman, Nationwide's vice president of advertising.
Schreibman said he would have liked to advertise during this year's Super Bowl but none of the concepts he looked at were "timely" enough for the company's Life Comes at You Fast campaign.
"Viewer's expectations are higher," following the success of last year's spot, Schreibman said, adding that "I know we could have topped it."
Instead, Schreibman said Nationwide will focus on advertising opportunities available through its new seven-year sponsorship of the NASCAR Nationwide Series.
A new twist. Finally, while many Super Bowl ads are predictable in their juvenile and over-the-top humor, PepsiCo (PEP, Fortune 500) is taking a novel approach with its 60-second pre-game "silent ad," which will feature dialogue in American Sign Language and written subtitles.
The ad stars two actual Pepsi employees who are deaf and is designed to bring awareness of the American deaf community to a wider audience, according to a Pepsi press release.
"This ground-breaking ad will heighten cultural awareness by millions of viewers during Super Bowl Sunday," said Bobbie Beth Scoggins, president of the National Association of the Deaf, which consulted with Pepsi on the ad.