The benefits of extravagant advertising and sponsorships
The benefits of extravagant advertising and sponsorships
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The Super Bowl LVII is happening this week and brands are spending eye-watering amounts of money on ads yet again.
The FIFA World Cup attracts sponsorship from the world biggest brands and generated around US$1.74 billion in sponsorship revenue during it’s recent 4-year cycle.
9-figure stadium naming rights deals have been recorded over recent years…
Why are brands prepared to spend so extravagantly on such deals?
Brand reach and exposure are the key reasons consistently cited. But there are other benefits to extravagant spending in sports that are cited a lot less.
The scale of spending - The Super Bowl
The average cost of a 30-second ad during the Super Bowl has been climbing YOY, and even with the state of the global economy (and potential headwinds some are still forecasting) ads have been sold for more than $7 million for 30 seconds of airtime.
It’s not only the media placement that costs a truck-load…
Like years prior, no expenses have been spared on production in 2023, and high-profile celebrities and superstars are a near-staple feature in many of the ads that are due to feature in the 30 second timeslots. Expect to see big names such as Jack Harlow, Missy Elliott, Will Ferrell, Ben Stiller, Steve Martin, Kevin Bacon and Serena Williams featuring this weekend - Check out Marketing Dive Ad Blitz for all the updates.
Above: PopCorners tease a new Breaking Bad inspired Super Bowl debut.
Super Bowl Halftime show sponsorship
Since 2012, PepsiCo sponsored the Super Bowl halftime show, reportedly paying more than $2 billion in total until they relinquished it this year. Apple have filled the void and agreed to pay $50 million per year, $250 million across 5 years according to AdAge.
FIFA World Cup Qatar 2022 sponsorship
The recent FIFA World Cup attracts some of the biggest brands in the world, such as Visa, McDonalds, Coca-Cola, Adidas, Kia, Hyundai, and Qatar Airways, and SportBusiness Sponsorship analysis indicates that FIFA generated around $1.74bn in sponsorship income during its 2019-22 sales cycle.
Stadium Naming Rights: A mega-event isn’t the only trigger for brands to spend BIG on sport…
In 2021, Crypto.com agreed to a 20-year, US$700 million deal to become the new naming rights partner of the (then named) Staples Centre - home of the Lakers, Clippers and Kings. The following year, Spotify also agreed to a new 4-year sponsorship deal with Barcelona FC for a reported $308 million. As part of this deal, Barca’s famous stadium was rebranded as “Spotify Camp Nou” and they became the front of jersey sponsor, among other things.
The above properties are so expensive for brands to associate with because they reach such large, global audiences.
It’s not only pure football fans that watch the Super Bowl. The advertising and halftime entertainment have become spectacles that many casual fans tune into. The NFL estimated (in collaboration with Nielsen) that the Super Bowl LVI total viewing audience was over 208 million. FIFA also recently estimated that 5 billion people engaged with the FIFA World Cup Qatar 2022. Although It’s unclear how FIFA produced this figure, it’s safe to say that it’s a big part of the globe. The accumulated reach and exposure throughout the year that Spotify and Crypto.com receive through their associated sponsorship portfolio’s helps to justify the brand’s spend to some degree.
But, there are additional benefits that these brands receive as a result of their extravagant spending…
The positive impact that the media context, and aligning to tier-1 sports properties has on brand perception.
Outlined in the book The Choice Factory, the author Richard Shotton writes about 25 behavior biases that influence what we buy. Listed as bias 15, he explains how the media placement of an ad effects its interpretation, and in particularly the positive perception created by “waste”. He goes on to explain that:
“Advertising known to be expensive signals the volume of the resources available to the advertiser… the advertiser has either persuaded lots of people to buy his product already, a good sign, or has persuaded someone to lend him lots of money to finance the campaign…"
This theory explains why brands would want to pay a (unreasonable to some) a premium to advertise during the Super bowl but it also…
…neatly explains why famous sponsorships are effective…
(such as the Spotify and Crypto.com sponsorships)
The context demonstrates a costly and, therefore, honest belief in the strength of the advertised product”
Some brands use extravagant spending to try further establishing themselves, and to showcase that they’re legitimate businesses. There are multiple brands in this stage of their business life-cycle making their Super Bowl debut this year such as E.L.F Cosmetics, streaming platform Tubi and Blockchain-based game developer, Limit Breaker. For these types of brands, the social proofing that extravagant spending creates can deliver trust and credibility, making their brands’ products more mainstream and widely accepted. As former Fox Sports executive turned media consultant Patrick Crake explains:
“If you’re in business with the NFL and you’re advertising during the Super Bowl, you’re a real player.”
Such spending and associations with tier-1 properties can also assist more established brands by creating the the perception of being a “market-leader” or further validate that they are one.
Sports fans beware - legitimacy and trust can be misplaced...
Looking to develop trust and legitimacy, many crypto brands produced Super Bowl TVC’s in 2022 or spent millions on sponsorship deals over recent years. After the Crypto.com stadium naming rights deal was announced, Crypto.com’s chief executive, Kris Marszalek said:
“In the next few years, people will look back at this moment as the moment when crypto crossed the chasm into the mainstream,”
As a result of large spending, it can be argued that some crypto brands were given a level of legitimacy that they may not have necessarily deserved. The most notable example is the now collapsed FTX, who had a huge portfolio of tier-1 sponsorships, and who created a TVC for last year’s Super Bowl featuring Larry David.
FTX’s extravagant spending enabled them to associate with some of the world’s biggest sports properties, enabling them to gain a level of legitimacy and trust that ended up backfiring on all stakeholders.
Something must be working though…
Although expensive, big brands continue to return to the Super Bowl, giving an indication that brands are seeing a return on their spending:
Anheuser-Busch has aired at least one ad every year since 1975
Kia: 14 x consecutive years
Pringles: 6 x consecutive years
Uber: 3 x consecutive years
Etc.
In addition, the global sponsorship industry continues to grow. Business Wire is projecting world wide sponsorship to reach US$116 billion by 2027, from an estimated US$77 billion in 2022.
Onwards and upwards!