Frito Lay Pepsi Super Bowl by Kyle Lane Flickr Licensed Under CC BY 2.0
Source: Frito Lay Pepsi Super Bowl by Kyle Lane Flickr Licensed Under CC BY 2.0

When an ad runs for 30 seconds during Super Bowl this Sunday, the advertiser will shell out around $5 million for this privilege. This price for one ad will be more than double what advertisers paid in 2007. Why are companies spending so much more money to run Super Bowl ads?

Even when they explain why, the reasons given by advertisers are a bit fuzzy. This is what Honda Auto’s marketing AVP Susie Rossick had to say on her company’s decision to advertise this year (2017):

“Of course there's always the feeling when something isn't worth getting involved with, but we still value this as a great platform to introduce a vehicle. 110 million people [watch the Super Bowl on TV] and nobody turns away when the commercials run. They watch, they engage, and it's a great opportunity to introduce our CR-V. I still strongly feel it provides a great return."

In this post, I want to try and explain the reason for the steep price increase of Super Bowl ads over the past decade. But first, have Super Bowl ad prices really risen that steeply (relative to the past)?

In so many media stories about this topic, the writer assumes that Super Bowl ad prices have grown to unreasonable levels. But to really see if this is the case, we need historical information. So let’s look at the average prices TV networks (whichever one was broadcasting the Super Bowl that year) charged advertisers since the very first Super Bowl in 1967.

Average Super Bowl Ad Prices, 1967-2017 by Utpal Dholakia
Average prices of Super Bowl ads from 1967 to 2017 (Actual dollars). Source: Motley Fool, Nielsen Media Research
Source: Average Super Bowl Ad Prices, 1967-2017 by Utpal Dholakia

As you can see, the growth in prices pretty much looks exponential.

But looking at actual prices is a bit misleading because they don’t account for inflation. So let’s look at the Super Bowl ad prices after adjusting for inflation, in 2016 dollars. This is what they look like.

Average Inflation Adjusted Super Bowl Ad Prices, 1967-2017 by Utpal Dholakia
Average prices of Super Bowl ads from 1967 to 2017 (Inflation-adjusted, 2016 dollars). Source: Motley Fool, Nielsen Media Research
Source: Average Inflation Adjusted Super Bowl Ad Prices, 1967-2017 by Utpal Dholakia

Now we see something quite interesting. There are clear patterns over the 51 year time period. I divided the ad prices into three time periods that have three different patterns.

  • Time period 1 (1967-1999):  From 1967 to 1999, for the first thirty years or so, the increase in prices was slow and steady, in keeping with increases in the growing number of people tuning in to watch, and the Super Bowl turning into a major cultural event.
  • Time period 2 (2000-2006): Then things went crazy because of the dot com boom, and prices just took off like a rocket in 2000, driven mainly by thoughtless spending by now defunct dot com companies. Many readers may remember Pets.com’s Sock Puppet ad from the 2000 Super Bowl (see below), the mockery that ensued, followed eventually by the company’s bankruptcy. After that, Super Bowl ad prices remained steady for the next several years.

  • Time period 3 (2007 – present): This is the most interesting period and the one I want to focus on. As we can see from the graph, growth in ad prices has been really steep over the past decade, much steeper than at any time before. And the steep growth came despite the fact that its starting point overlapped with the beginning of the Great Recession. The question is why.

Are more people watching the Super Bowl since 2007?

One reason that some experts give for the increase in Super Bowl ad prices is that TV viewership has grown so advertisers are paying more to reach these extra viewers. To see if this is the case, I added the viewership numbers from all 50 Super Bowls to the graph. This is what it looks like with the addition.

Average Ad Prices & Viewership 1967-2017 by Utpal Dholakia
Average prices of Super Bowl ads from 1967 to 2017 (In inflation-adjusted 2016 dollars) + viewership in millions. Source: Motley Fool, Nielsen Media Research, Sports Media Watch
Source: Average Ad Prices & Viewership 1967-2017 by Utpal Dholakia

As we can see, yes, viewership has certainly spiked since 2007. It was bouncing around 80-85 million before that, it has gone up to around 110 million viewers since then, and has been somewhere in that range for the past five years. What is intriguing is that despite virtually no increase in viewership  from 2012 to 2016, ad prices still went up by a cool one million inflation adjusted dollars.

So while increasing viewership may explain part of the price increase over the past decade, it still doesn’t seem to explain it completely. So what does?

I think the answer lies in consumers’ increasing engagement with Super Bowl ads using social media before and after the game.

The way I see it, the biggest reason for the growth in Super Bowl ad prices is the corresponding growth in social media, and how consumers interact with Super Bowl ads through these media. Just take a look at this graphic of social media users, created by Pew Research Center based on all their surveys.

US adult social media users, 2006-2016
Source: Pew Research Center
Source: US adult social media users, 2006-2016

The growth of social media users pretty much parallels Super Bowl ad prices. Moreover, what the graph leaves out is that people are using social media more and more heavily over the past five years, amplifying the role of social media even further.

When we see advertisers spend $5 million for a 30 second Super Bowl ad this year, most of us are only seeing only part of what’s really going on behind the scenes. The marketers and PR folks in these companies are occupied for weeks before and after Super Bowl, running all kinds of parallel advertising and social media campaigns and generating consumer interest.

Many advertisers put their Super Bowl ads out on Facebook, YouTube, and Twitter well in advance of the game. In fact you can see many of the ads that will appear during this Sunday’s Super Bowl online already. Consumers watch these ads, talk about them through Facebook posts, tweets, blogs, and so on. Industry experts call this as “consumer engagement” and each Facebook like, tweet, etc. has a dollar value associated with it.

Super Bowl Confetti Drop by Anthony Quintano Flickr Licensed Under CC BY 2.0
Source: Super Bowl Confetti Drop by Anthony Quintano Flickr Licensed Under CC BY 2.0

What is more, all kinds of media stories appear about which ad was good, which ad was bad, 10 best ads of this year, 10 worst ads of the year, and so on. Advertising industry experts and marketing professors have made a cottage industry of dissecting every nuance of these ads on radio and TV shows before and especially after Super Bowl.  A lot of this ad-related content makes its way on social media, creating even more shares, likes, and tweets for the brand.

Who wins in all this? Clearly, the advertiser because they get all this extra publicity for free (or actually as part of the $5 million). By the way, the industry term for all this free publicity is “earned media” because the advertiser didn’t have to pay a dime for all this air time and print space.

Once we get the full picture, the economics of why ad prices have gone up so much makes a bit more sense:

$ 5 million for one 30 second 2017 Super Bowl ad = (approx.) 120 million viewers’ eyeballs during the game + consumer engagement through social media for weeks before and after the game + earned media from free publicity for weeks before and after the game.

The steep increase in Super Bowl ad prices is because of social media. In fact, if we look at the value Super Bowl advertisers are getting for their money in consumer exposure and engagement with their brand, many of the savvy repeat advertisers are actually getting more value than they did in the pre-social media era. And $5 million in 2017 may seem like a real deal to them compared to $2.5 million ten years ago.

So here's my prediction. It's not about which team will win Super Bowl. It's that we will continue to see Super Bowl ad prices go up each year as long as social media engagement with these ads continues to increase, and as advertisers become better at creating and measuring social media engagement, even if actual TV viewership of the big game stagnates.

About Me

I teach marketing and pricing to MBA students at Rice University. You can find more information about me on my website or follow me on LinkedIn, Facebook, or Twitter @ud.

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