Maybe Super Bowl Ads Are Too Cheap

The price of a 30-second ad slot during the Super Bowl goes up every year. In 2012, ad time is going for $3,500,000 per spot, or $116,666.67 per second. But maybe everyone involved is looking at this wrong. Maybe the eyeballs of the nation and the free publicity that comes along with buying a slot during the game are worth more than that, and networks should truly let the market decide.

As part of a series on football for the NFL Network, the Freakonomics team examined the question and interviewed some important experts: sports business CNBC reporter Darren Rovell, Bob Parsons, CEO of regular Super Bowl advertiser GoDaddy, and the man who actually sold all of that ad time this year: Seth Winter, head of sales for NBC Sports.

The problem with the Super Bowl advertising market is that it isn’t a market at all. Markets are about supply and demand, and adjusting prices as those things shift. When these ads sell, it’s at a price set in advance, and they always sell out. What would a real auction look like?

Are Super Bowl Ads Too Cheap? [Freakonomics]

Comments

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  1. maxamus2 says:

    Um, the spots are $3,500,000, not $350,000, and it is $116,666.66 per second. OP must be a politician, what’s a decimal place here or there?

  2. Buckus says:

    I thought the price was well over 3 million. Remember when it was one million back in 2000, and Outpost.com had an ad that was basically “We’re wasting a million bucks?”

  3. gman863 says:

    I think Laura misplaced the decimal point. 30 seconds on the Super Bowl hasn’t been that cheap since 1982:

    http://en.wikipedia.org/wiki/File:Superbowl-advertising-30sec-1967-2010.png

  4. Torchwood says:

    I don’t quite understand the problem here. The network is setting the price here, and the advertisers advertisers were more than willing to pay the piper. There was a meeting of the minds, so what is the issue here?

    Of course, there is the conversation about how you can better spend $3.5 mil, like how many people you could hire with that money, but I am not a MBA.

    • runnershigh17 says:

      The question they are raising is what if the spots were sold in more of an auction format not at a set price. There is no meeting of the minds when the network sets the commercial price and the advertiser pays. This leads to first come first serve kind of deal since they sell them based on who pays first. In a true market a company could vault ahead by paying more for the spot.

      • Darury says:

        There seems to be some confusion between market and auction. If I go to the market, I don’t have to bid against someone else for a loaf of bread that’s on sale. If I arrive and get the last loaf, the other person doesn’t get to offer an extra dollar for it. It’s first comefirst serve.

        In a simliar fashion, the network has decided that a 30-second spot is worth $3.5M and there were companies that were willing to pay that. Perhaps they’ve decided that an auction format would be riskier? Maybe they only sell enough at $8M to cover 5 sales at $3.5M but others decide to avoid it since they assume they’ll be priced out of the market. Suddenly they have 100 spots available they now have to try selling for less than if they had a single price for everything.

  5. farker says:

    Check your math again, Laura.

    #corrections

  6. Clyde Barrow says:

    The superbowl? Who cares. It’s become nothing more than an organized, political event for

    1. Mundane, boring plays that last a total of 3 seconds each
    2. Showcases overpriced tv commercials, most which are not as good as expected
    3. Commercials will appear more often than the game itself

    This year it will be no different. The kickoff, the ball is caught, yellow flag, the ref will stop the play. Go to commercial for five minutes.
    The next play the ball will be fumbled. Go to commercial for five minutes.
    Fifteen minutes into the first quarter, we’ll see maybe 30 seconds of an actual game.

    I haven’t watched it in years and I won’t this year either.

    • dorianh49 says:

      Yeah, I’m a 49er fan, too.

    • human_shield says:

      If you aren’t drunk, 30 seconds is about all you can expect someone to watch without getting bored.

    • minjche says:

      To address your “who cares?” question, I’ll go with: “Not you, but literally over 100 million other people.”

      If you work that into the 307,000,000 Americans as of 2009, then you could go with “Not you, but literally a group of people equal to or greater than one third of the U.S.”

      Personally, at that point I’d stop saying “Who cares?” and start saying “I don’t personally care.” But that’s just me.

      • Clyde Barrow says:

        Sure min, I knew someone would start listing “numbers” to prove a point.

        Per my point, another kickoff just occurred at 7:08. Now it is 7:09 and another commercial. That scene lasted maybe 30 seconds. As I said, this game is not about football anymore but it is about stupid comm’s and making money.

        • minjche says:

          Not to pull you out of your delusion or anything but: The NFL, or any professional sports league, has always been about making money. It’s a business. Businesses do things to make money. The NFL was never about “football” and “football” alone, the NFL has always been about “making money from football”. The sooner you figure that out, the sooner you’ll stop posting ignorant and whiny comments. If you want to watch pure “football”, go watch a high school game, or go play a game of football with some friends.

          Thanks for the lol with your “numbers” comment, too.

    • jeepguy57 says:

      You sound like a real fun guy to hang out with.

  7. The Brad says:

    I did a research piece for a class a while back correlating purchaing super bowl ad time and the companies stock price. Long story short, if you’re new to having a superbowl ad it’s good for you otherwise a superbowl ad does very little (if anything) to your stock price. Oh and if you stop producting superbowl ads, no change in your stock price.

  8. Conformist138 says:

    I’m willing to bet NBC knows what they’re doing when they set that price. It can’t be a real market since it’s a monopoly, once a year event with a set number of slots that NBC wants to sell out of. Kinda tough to let a market be ‘free’ with those conditions built in.

  9. Echomatrix says:

    its easy. Just hold an auction. I kinda wondered why they didn’t do this already.

  10. Robert Nagel says:

    Apple screened their “1984″ advertisement for the Macintosh one time only during the Superbowl. It has been re-shown over and over through the years. There is something special that goes with being on the Superbowl which makes the ad an event in and of itself, worthy of large sums of money due to this magic effect. How many regular ads get discussed over the water cooler?

    • ExtraCelestial says:

      I think a good (or particularly annoying) ad will get talked about regardless of when it is shown. The difference is that during the Super Bowl you have a much larger audience, many of which are specifically watching for ads. During regular TV you would have to run the commercial dozens of times before it comes close to the number of viewers. At work we’ve had plenty of “water cooler” type discussions where someone brings up an ad and they’re the only ones that have seen it or maybe half the group hasn’t. It completely depends on the frequency you are watching TV and the types of programming you watch. You have to wait a while before the ad reaches everyone. With the Super Bowl you have a greater influence on exactly when it will be seen and it’s fresh and new to everyone at the same time

  11. retailriter says:

    They are ruining the “mystique” of the Super Bowl commericals by releasing them before hand.

    Wonder why they don’t “get” that?

  12. RenegadePlatypus says:

    “…the free publicity that comes along with buying a slot during the game are worth more than that…”

    Huh? Let me get your logic straight: “free publicity” means paying $3.5M for an ad spot that generates the publicity that they paid such a high price for?

    People discussing your paid advertisement is not “free publicity”.

  13. smartmuffin says:

    I thought the studies done on this have indicated that super bowl ads were NOT worth the price…