FOOL ON THE HILL
An Investment Opinion
On Advertising Bill Mann (TMF Otter)
January 28, 2000
Over this next weekend the nation is going to go through the annual ritual of watching the Super Bowl ads. Companies are shelling out on average $2 million to ABC for the right to show each 30-second spot. The popularity of the Super Bowl ads was driven home to me when ESPN ran an online poll that showed that almost as many people watched for the ads as did for the actual football game. (By the way, a full 0.5% voted that their favorite part of the Super Bowl was in fact, the halftime show.)
There are some twisted people out there.
The Super Bowl used to be an event that saw the biggest companies with the biggest ad budgets pulling out all the stops. Who can forget "The Bud Bowl," the Pepsi Hidden Camera ad, or even the Holiday Inn sex-change spot? But last year we saw a bit of a change, when a few small Internet companies blew huge portions of their operating budgets on Super Bowl spots in the hopes that the exposure would help build momentum for them. And this year, the Internet companies are lining up to hand over the loot, as such unlikely sponsors as Microstrategy (Nasdaq: MSTR), LastMinuteTravel.com, OnMoney.com, and LifeMinders.com (Nasdaq: LFMN) are set to join the old standards in front of millions of viewers on Super Bowl Sunday.
In a market that gives so much value to concepts and "buzz" about companies, this money may in fact be very well spent. But I can't help think that these companies' ads may get lost among each other.
I don't know about you, but for me these dotcom companies' ads start to run together after a while. They've got the same voice, the same ironic, sardonic wit, and the same yadda yadda.com handle at the end. You know how beer ads used to be so clever that at the end you couldn't for the life of you remember what suds were being pitched? I'm starting to see Internet company ads the same way, minus most of the clever part.
By the way, I LOVE those Budweiser ads:
"Nothing, just watching the game."
The guys who wrote that ad had to have done a great deal of "field training" before they came up with that. Pure evil genius.
Ads are an enormous part of the equation for many companies. Not just the number, but also the message of the ads. Coca-Cola Company (NYSE: KO) does not expect you to see its ad on the back of a magazine and go "Hmmmm, this reminds me that I'm thirsty." Neither do cigarette brands. But such a large portion of these businesses, as well as beer, is the promotion of the brand that the advertising budget is looked upon as an investment into the intangible goodwill of the company. Coca-Cola did not become the world's most valuable brand by being passive about it. After all, when you get right down to it, Coke is sugar water. So is Pepsi (NYSE: PEP) RC Cola, and every other pretender to the throne. The difference in their franchise values and level of sales has been largely caused by the relative success of Coke at promoting itself.
The difference in ad campaigns is as subtle as it is crucial. Coca-Cola has, since day one, used the brand to drive home the importance of Coca-Cola in our lives. "It's the Real Thing," "Coke is it!" and so on. Pepsi, on the other hand, has elected to use outside influences, famous people, and "newness" to promote its
Speaking of successful advertising, I saw something the other day to put into my "Way to Spend Money Searching for the Obvious" file.
As it turns out, and I'm sure this will surprise you as much as it did me, a medical survey found conclusive evidence that the effectiveness of pharmaceutical ads is decreased by the description of side effects included at the end. I know, I know, it's hard to believe, but it seems that people are somehow made less excited about a product when it is disclosed that there have been instances of people talking like W.C. Fields or having their ears fall off as side effects.
I'm sure that these statements of risk are really needed, but I'm not sure what else the researchers thought they'd discover about people's reaction to side effects. "Explosive diarrhea? That sounds great!" To the people who sponsored this study: send me a couple hundred thousand dollars and I'll perform an exhaustive study to determine which dogs like better, T-bones or haiku.
Advertising can make or break companies that provide image. Gap (NYSE: GPS) pulled a rabbit out of its hat last year when it convinced its core market that khaki pants were not just for people who look bad in jeans. Bad advertising, on the other hand, can create such ill will that it drives customers away from a company's products. Two years ago I got so annoyed at a particular Samuel Adams beer ad (the radio spot in which a guy slurps spilled beer off the table rather than just getting a new one) that I put a moratorium on buying any Boston Brewing Company (NYSE: SAM) product until it went away.
Other companies cause damage to the value of their trademarks by completely mis-marketing them. Trademarks are known as "intangible assets," but don't tell that to Iridium, which quickly got a reputation for unreliability when it misrepresented the capabilities of the company's network. That intangible asset became awfully tangible when the company squandered it away.
Still, the most mystifying ad campaign has to be the one for BASF, the German industrial corporation. You know the ads: "We don't make many of the things you buy. We make many of the things you buy better." I have seen these ads now for more than a decade and I still have absolutely no idea what BASF does. Why do they bother spending this money? I could even understand just a little if the company was seeking to raise visibility to prospective shareholders, but BASF is not even listed in the US.
Someone tell me -- what am I, Joe Consumer, supposed to take away from these ads? That BASF doesn't make anything?
Bill Mann, TMF Otter on the boards