Basic Economics Driving Super Bowl Ad Buys

This year the focus of Super Bowl advertising has been more on who is not in the game, then who is. Annual stalwarts Pepsi and FedEx are out, and major US car companies will obviously take a back seat. It’s easy to point to the economic recession causing major companies to reassess internal spending, but a better reason is that $3m for 30-seconds only makes fiscal sense in specific situations.

What the recession has forced companies to do is assess ROI (or some measure of impact) of its marketing spend. In doing so, some major brands have come to the realization that all the theatrics and hoopla surrounding the Super Bowl don’t necessarily add up to sales increases. In fact, if a brand drops the ball during the big game, it may actually hurt sales, while a good commercial may find itself into the highlight reels for all of the following week but not necessarily into the next 10-Q. It raises the age old question if someone is going to pick Coke vs. Pepsi based on which commercial they like better.

The Super Bowl is great for smaller or start-up brands looking to emerge into the mainstream and announce themselves. It also benefits more established brands launching a new product line, attempting to reposition within the marketplace, or putting out a specific call to action with the goal of capturing market share. E-Trade and Monster successfully pulled off the former, while Denny’s was hit using the latter strategy with its popular offering last year. Denny’s returns with a similar spot this year, which they can easily measure the success of by counting customers who use the offer, and is a smart ploy since once you have customers in the restaurant you have a greater chance of retaining that customer.

While E-Trade and Monster continue to use the Super Bowl to build their brands, many first-timers will attempt to catapult themselves into the public eye, including Qualcomm’s FloTV, Boost Mobile, and tru TV (a Turner network). The Super Bowl makes sense for all of them as they are announcing themselves and their products to a broad audience, or in the case of truTV, introducing a show related to football that will attempt to capture new viewership for the channel.

On the other hand, does it really help AB-InBev to continue putting up Bud and Bud Light ads every year, or Coke to come up with a new creative and spend close to $6m for one-minute? That’s why Pepsi and FedEx made smart decisions not buying time. They have nothing new to say, no new products to launch, they are already well-established brands that everyone watching the game is familiar with, and to be honest, they may actually receive more hype leading up to the game by deciding NOT to advertise than some competitors who do decide to advertise, an interesting reverse psychology.

In the end, it should not be a big story that FedEx and Pepsi are out, and the likes of kgb and Motorola (desperate to push its new phone) are in. It marks the natural evolution of Super Bowl ad economics. Established brands buying simply to showcase a new creative and be the talk of Ad Week is not worth $3m+, while new brands and new products can use the game as their introduction to the world since it’s the broadest reach it can achieve in one spot all year. However, given the cost relative to the marketing spend and revenue for some smaller, growth companies, a Super Bowl ad buy can be make or break – as many found it during the dot come era.

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You Tube Ad Selection Could Unlock Online Advertising Value

By giving users the option to choose which ad they prefer to see, and allowing them to pick pre-roll or in-stream, You Tube is one of the pillars of digital media into digital advertising – interactivity. My only question is what took so long.

Content providers and social media mavens preach about the user controlling their experience. It’s where the proliferation of technology has taken media – from a one-way, produce controlled experience to an interactive user-controlled phenomenon. Everyone writes about it, acknowledges it, knows it, but it has yet to successfully take shape in digital advertising. Until it does, the economic model for digital will struggle.

Though I have not seen the You Tube implementation, I see many benefits to the implementation I envision. First, users are immediately more interested in the advertisement because they chose to watch it, thus likely picked something in which they have at least some interest. It creates a self-selection process better than targeted ads, in which users say “I want to see this ad”, which goes a step beyond sophisticated software telling them what ad they want to see. Of course, that software may eventually play a role in what choices the user has. Second, regardless of how privacy issues play out, it opens the door to a slew of valuable market research – linking who is choosing to watch ads from certain brands, what type of videos are affiliated with certain advertisements, to name a few points. Clever marketers could also do indirect surveys, by providing users with a list of different ads for the same brand to evaluate effectiveness, or ads for different brands for the same company to test target market.

Also important, it puts the onus on the creative. Part of the reason ad dollars online lag traditional is the ineffectiveness of the marketing. Simple banner ads, or boring slogans don’t cut it. Users want informative, they want entertaining, and they want interaction. Essentially they want content. Digital ads need to become content. Putting users in control forces marketers to develop the best ads possible, or nobody will watch them. Besides not getting the message out it will create a negative perception for the brand in the digital world. Challenging marketers will improve quality across the board. Possibly more dynamic ads, or ads that are custom to the individual and have direct interaction, bottom line it should stimulate innovation.

The question remains how to implement the economic side of this model. Do you penalize poor marketing by charging higher rates, or charge more to ads that more people like, which could remove some incentive to be great. Is CPM, CPC, how often its selected, or any of the above the right metric to use? More to come on that front, for now let’s see it action and work out the model.

Two Major Digital Deals Accelerate Live Sports Streaming Issue Into Forefront

This week ESPN struck a deal with MLBAM  for additional mobile and online video highlights, the ability to sell content through iTunes, and most importantly, rights to stream its national telecasts via ESPN360. Only days earlier the NBA authorized teams to stream games online in their local market, a first for any major sport. Both followed the NFL announcement that Sunday night football will be available live on NFL.com and NBCSports.com this season. Buckle up, its no longer coming – live streaming is here, and its about to explode.

These three recent deals involve diverse issues – the NBA allowing teams to compete directly with local RSNs, MLBAM distributing digital streaming rights rather than broadcasting in-house and expanding ESPN’s repertoire of rights both content wise (mobile, highlights, games) and scope-wise (international rights), while the NFL tiptoes around big money national television contracts and the implications on those contracts if they expand the offering.

In all scenarios, the sport wins because online streaming expands viewership and engages fans more deeply by enabling interactive features, such as integrated statistics, multiple camera views and message boards. Selling digital rights generates additional revenue, either through selling services, or distributing more than just TV rights.

Networks range from cautiously optimistic to downright angry. RSN’s with local basketball TV rights may challenge the NBA’s decision to allow local market streaming. It’s a mistake because fans want streaming. If we’ve said it once, we’ve said it a thoushand times, streaming television online does NOT cannibalize the viewing audience, it complements it. Viewers with access to an HDTV will always opt for that over the computer. However, fans who can’t watch for some reason, be it they are at work, or share a TV with others that are watching another program, now have access. Even viewers already watching the broadcast may opt for complementing it with an online experience to take advantage of the interactive features and additional camera views, plus other social engagement tools offered.

Rather than squawk about it, RSN’s should capitalize on the opportunity by buying the digital rights from the local team. With new audience measurement tools that integrate online and VOD viewers into the toal broadcast numbers, such as NBC’s TAMI product being tested during the Olympics, RSN’s can provide tangible evidence of cross-platform usage and leverage it to sell advertising. If they play their cards right, RSN’s can increase advertising revenue by integrating online and television.

ESPN picks up where TNT started in the NBA playoffs, enhancing national telecasts through broadband, then supplementing it with additional digital rights. ESPN’s strategy is to maximize its digital rights in every programming contract. Though the worldwide leader’s implementation leaves a lot to be desired, they hold the rights for the coming years to many valuable properties and have the opportunity to set the standard live streaming in major sports. First, they need to address the fact that ESPN360 is not widely available. The network streamed last Sunday night’s telecast, and will continue to do so, however most people will hardly realize it because ESPN360 is more mysterious than Versus.

Possibly more intriguing and opportunistic for ESPN are the expanded video highlights and international rights, two topics that require separate discussions.

Meanwhile, the NFL is late to the game because they can be. It’s unique apppointment viewing schedule and immense popularity allow it to tiptoe into the process, learning from the others mistakes, while the NBA and MLB need to leverage the opportunity to grab more fans. Those leagues also have more to work with because of the local television deals and additional games that the NFL does not have.

Leagues and teams will benefit the most by packaging digital rights as part of national and local distribution deals, though its still difficult to put a valuation on them. ESPN and MLBAM did not disclose terms of their contract. Leagues (or MLBAM in the case of baseball) can still generate incremental revenue by selling subscription based out of market packages, which serve a niche audience. While RSN’s and national providers will increase advertising revenue with additional inventory and higher CPM’s if they generate deeper fan engagement, the goal of the digital rights. Networks that implement successfully will see increased traffic in other parts of its site, leading to increased revenue. Subscription based revenue remains a possibility down the line. Possibilities exist for sports ad networks, amongst other synergies.

Criticism of Nike Unjustified

Nike responded to public outcry about homophobic undertones in its recent ad campaign for Hyperdunk shoe, by pulling a series of ads posted around New York that show a player’s head between a dunker’s legs as he leaps over the player with the new Nike shoes. It’s the latest episode in an overly public correct world.

No matter if its gay rights, womens rights, or any other rights, I’m in favor of exercising them when appropriate, not in this matter. Wieden and Kennedy, the ad firm, and Nike, clearly had no intention of making light of homophobia in sports. The message was how these shoes can make your opponent look silly while you leap over them, or outrebound them, as other ads in the campaign showed. Attacking innocent parties is not the way to defend your rights and build credibility.

Typically, Nike would deserve criticism for pushing the envelope enough for societal questions to even come up, but they don’t deserve fault in this case. When you heard Imus’ comment about the Rutgers women’s basketball team last, his defamation was clear. When I saw this Nike ad, infringing on gay rights did not immediately come to mind, though I did cringe because it does look awkward.

Could and should Nike do a better job, yes. Even if undeserved, the publicity is never good. Pulling ads early never looks good. I commend them for acting quickly to defuse the situation, minimizing the public outcry. In the future, Nike, and any companies, are advised to avoid anything that is borderline controversial. But haven’t they already received enough warnings, yet it still keeps happening. Because it’s not blatant, perhaps gay rights organizations could have approached Nike in a more direct, less public manner to advise about the ad, and allow Nike to react before creating a media blitz.

By walking the line of political correctness, whether they planned to or not, Nike drew buzz for the new sneaker. By defusing the controversy before it snow balled, most of the public is now just left with the sneaker on their mind. WIll it translate to sales? Remains to be seen.

On-Field Sponsorships Not The Answer For Major Sports

Four years after Major League Baseball launched an ill-conceived plan with Paramount to promote the Spiderman movie by putting the movie logo on the three bases of each major league stadium for an entire that almost gave baseball purists a coronary before it was canceled, MLB found a new, creative way to integrate a sponsor. MLB teamed with Paramount to promote the upcoming Indiana Jones movie by putting a picture of Indiana Jones on May 22nd, the movie’s premiere date, of each team’s schedule on MLB.com. The promotion works on many levels, its creative, non-intrusive, and will draw eyeballs and get attention of the target demographic, who constantly check team schedules.

However, it raises the question on where to draw the line with sponsorships in sports. MLS allows teams to sell uniform space, the NHL tested virtual ads transposed on the ice during the playoffs, baseball stadium outfield walls, yet the public outcry when baseball even considered a logo on the bases was enormous. That promotion would have created a major backlash against both the league and the product.

In the constant quest for additional revenue, leagues, teams, and networks continue to push the envelope, each league brings different parameters to the table. MLS, and all the individual sports (golf, tennis, etc.) can get away with uniform ads, however, we are far from the day when fans will accept a Visa credit card ad on an NBA jersey, NFL uniform, or baseball uniform. Its a lucrative concept – DC United recently signed Volkswagen for 5 years, $14 million so imagine what real estate on the Lakers or Celtics uniform would yield. But it invades tradition, creating the potential negative backlash I mentioned earlier.

On field advertisements are different, I think basketball courts and football fields are already littered with enough graphics – be it the league or team logo, field name, or end zone design – that an advertisement on the hash marks is not a far reach. The NBA and NFL should carefully seek sponsorship deals for various parts of the field that have excessive exposure. Football teams could seek sponsors for goal posts or the padding under the posts and the play clock, while the NBA has the shot clock, the post holding the basket up, and the scorers table. From there, sponsorships can migrate onto the playing field without too many arguments. Basketball arenas are already testing technology systems that can display ads on the background during stoppages in play. Baseball is the only field still treated as sacred to this day, though the outfield walls and foul poles are already fair game.

Before moving to the field, sports entities should maximize in-game TV sponsorships. For instance, almost every sport leaves a basic score graphic up the entire game that includes the network’s logo, occasionally expanding it to show a stat, such as a basketball team’s shooting percentage, or a batter’s career against a certain pitcher. Network’s can replace their logo with a sponsor’s logo for a temporary amount of time, allowing them to sponsor this portion of the game. Or, rather than a pop-up that shows Derek Jeter has three home runs in his last ten at-bats, flash a small ad graphic each time Jeter gets up. Sell a sponsorship for his at-bats all season. On screen exposure during the most watched points of the game is invaluable to a sponsor.

These ideas only scrape the surface of what’s possible. It goes without saying networks must diligently avoid clutter, and be careful to make the ad’s too intrusive. The key is creativity and subtlety, or again that backlash and failure risk comes into play.

Putting my digital hat on for a second, more leeway exists in new media because the viewers it caters to are of the less traditional, younger demo, and because new media itself is less traditional. Content owners can leverage that opportunity to maximize revenue. Moving beyond the normal pre-roll and overlay advertising using in online video, arguably more effective than TV advertising because its time-shift proof, the surrounding screen that houses the embedded player can be sponsored. Add a social networking component to engage viewers during the game. Fans will debate that pitching move in the eighth inning somewhere, give them the forum to do it right online with everyone else watching the game. Fantasy games, product placement within broadband only telecasts, mobile, the list is endless for new sponsorship revenue opportunities, albeit none reaching the masses as traditional television does at this point.

Before one of the major sports cannibalizes the purity of the game by invading uniform space, or plastering logos on balls, many creative ways exist to generate additional revenue that are not currently used. Each sport has a different threshold that it can push without alienating fans and challenging the establishment. Uniform advertising is accepted in soccer because fans are accustomed to seeing it in Europe. Hockey may get away with it, the major league most in need of new revenue and attention, fans tolerate change more than in other sports. Football and basketball have to avoid the uniforms, but should investigate on-field advertising, with care to avoid clutter and overwhelming fans, while baseball needs to steer clear of the field altogether, outside of virtual signage. However, baseball has the most in stadium, off field sponsorship opportunities because of the unique nature of each stadium, and interactive fan opportunities it presents. Before broaching that topic teams and networks still have creative leeway with their telecasts.

Advertisers Follow Viewers to the Web

Friday the Washington Post reports earned $4.83 in advertising per online viewer for the recently completed NCAA basketball tournament, compared to $4.12 for each television viewer during the tournament. This  revelation should calm broadcasters who have struggled with putting their most valuable television properties online, either live or in close proximity to debuting on the tube (for sitcoms), in fear of cannibalizing the viewership without receiving equal value.

By no means has digital usurped traditional media in the revenue department, the extra 71 cents per viewer not compensating for 132 million to 4.8 million advantage television owned in viewership. It signals the start of a trend. Networks and advertisers finally are starting to get it – digital media has a market, a potentially valuable one at that.

Time-shifting technology has rendered television advertising less valuable in the past few years. More viewers prefer to use a DVR to fast-forward through commercials, than watch an event live. Online advertising is one option to guarantee your message reaches the viewer. Many video applications, Hulu and Joost for example, build commercials into the shows that viewers can’t skip, a particularly valuable tool for advertisers that grab the promotional spot before the show starts.

Television suffers from “one and done” syndrome. Once a commercial airs, its over with, you reached who your going to reach for that spot. Digital thrives in on-demand video and archived video. So an advertisement lives beyond the moment, each time a user calls up that video they see the ad. It may not reach as many viewers on aggregate, but has a longer lasting effect.

Advertising online also has more reach than television. The Internet has no boundaries. Users could send links to friends in other parts of the country, younger and older, even overseas. International exposure is an interesting concept to watch for broadcasters and advertisers alike – a new, expanded market previously unreachable.

Networks need to lead the way, advertisers will follow. Consumers are out there waiting for you.