Association of Marketing Theory and Practice, Association of Marketing Theory and Practice 2011

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Superbowl Advertising Effect on Stock Prices
Renée Fontenot, Rick Mathisen, Tom Miller

Building: Edgewater Beach Resort Conference Center
Room: Sago Palm 2
Date: 03-24-2011 - 09:30 AM – 10:45 AM
Last modified: 03-06-2012

Abstract


Saints win over the Colts, 31- 17 and most Super Bowl advertisers share the Colts' experience in the twenty days following the game, as their stock values underperform from the average experienced by the market. Over the past ten years, 356 ads from publically traded companies have aired during the super bowl. With the cost of a 30 second spot during the 2010 game of $2.5 - 2.8 million (Fredrix 2010), it is hard to imagine that only half of a company's advertising is wasted (Wanamaker 1838-1922). In 1966, $42,500 bought a 30 second spot during the first AFL-NFL Championship Game (Edwards 2010), later to be called the Super Bowl. The value of paying the escalating cost for a spot during the game seems like questionable choice from a stockholders perspective.

This paper examines the stock prices of publically traded companies that paid for advertising during the Super Bowl over the past ten years. Economists the likes of Milton Friedman, believe that the responsibility of a company is to maximize profits for its stockholders (1970). Stock prices are one of the most meaningful measures of a company's profitability. In addition to the cost of the ad spot, the cost of producing the ad itself can reach upwards of $2 million (La Monica 2007). As such, it would expect that for roughly $4.5 million stockholders should expect a positive reflection in the stock price in the period immediately following a game. Though the actual companies that will have ads during the game are announced in advance, it is not until the ads are viewed by the approximately nearly 100 million television viewers, that the favorability of the ad and its impact on the company can be evaluated.

While previous research has examined the effect on stock prices in a five day window before and after the Super Bowl (Eastman Iyer, and Wiggenhorn 2010), this research compares the abnormal returns 20 days before with the 20 days after using the Fama and French model. This model uses three factors: CAPM, size risk, and value risk (Fama and French 1992). Comparing stock prices, roughly 30% of the market fluctuation can be explained as unique to a particular stock. The Farma-French model examines the abnormal responses that would not be explained by the market. A review of these abnormal responses across the past ten years indicates that in only four years, 2002, 2006, with 2007 and 2008 did Super Bowl advertisers experience a more positive response than the market in general, and then only slightly.

Keywords


Advertising; Marketing; Stock Prices

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