Motley Fool Money - Record Ad $$$ for SB 57

Episode Date: February 8, 2023

Companies are shelling out big bucks to get your attention during the big game.  (0:21) Bill Mann discusses: - Chipotle maintaining their stance on prices - Dutch payment processor Adyen dealing with higher costs - Uber posting a profit in the 4th quarter thanks to the company's investments (10:30) Dylan Lewis talks with Ad Age editor Jeanine Poggi about some of the major brands looking to get your attention before, during, and after Super Bowl 57. Stocks discussed: CMG, ADYEN, UBER, FOXA, COIN, NFLX, TAP, BUD Host: Chris Hill Guest: Bill Mann, Dylan Lewis, Jeannie Poggi Producer: Ricky Mulvey Engineers: Rick Engdahl, Tim Sparks Learn more about your ad choices. Visit megaphone.fm/adchoices

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If you're 45 or older and at average risk, ask your health care provider about the Coligard test. Colagard is available by prescription only. Learn more or request a prescription today at colagard.com slash screen. The Fox Network will take in $600 million in advertising for Super Bowl 57, and we've got a look at some of the brand shelling out the money. Motley Fool Money starts now. I'm Chris Hill joining me today, Motley Fool's senior analyst Bill Mann. Thanks for being here.

Hey, Chris, how are you? I'm good. We got a trio of earnings reports. We're going to start with Chipotle. And the headline in the fourth quarter, not great. Profits in revenue lower than expected, same store sales. But continuing a pattern that we've seen for a while, not just from Chipotle, but from others, where the overall transactions fell, but the pricing was up just due to inflation.

And as we've talked about in the past, Chipotle continues to exercise their pricing power. They do. They described that as going to the board. And they did actually go to the board this quarter. They really pointed to some weakness in delivery transactions, said that that that was down about 15% over the quarter. Clicking out just a little bit on Chipotle, they are a true winner from over the last during the pandemic. Their sales are up 50%. Profit is up 150%. Store counts up healthily. Shares are up a lot. So, yeah, it's a little bit of a blip,

but I don't see anything in this report that suggests that Chipotle is anything but operating with full force. And you listen to CEO Brian Nicol, he kind of took like maybe a quarter step back from what he has said in the past. You know, you think back to a year ago, he was talking openly about their ability to raise prices. This time around, he's not really doing that because they're not actually doing that, but he did talk about them maintaining their pricing. And they're seeing sort of the universe of people who are willing to continue to eat at Chipotle. And in terms of their results, it's a good number.

Stephen Ells made this point, and I think Brian Nicol believes the same thing. Stephen Ells was the founder of Chipotle, and that is that going to the pricing board is not something that they want to do. That is not what they consider to be the most healthy form of growth for them. There's only so many times that you could do it before you give customers a reason to go look at alternatives. So, yes, there is a very distinct reason why he didn't bring it up. There was a very distinct reason why this is not their actual first choice in terms of how

they go about increasing earnings and results. Going to the pricing board and increasing pricing is something that they do. more under duress than they do as a matter of strategy. We move from burritos to payment processing. Shares of Aiden down 15%. This is the Dutch company that does not report on a quarterly basis. This is their second half of the fiscal year results. And broadly, Aiden is dealing with some higher costs.

Should I tell you that it's pronounced adjun? No, which is why I'm continuing. to pronounce it, Aiden. But yeah, let's go with Adyan. Rather than re-record, let's just keep my mistake in there. We all make mistakes. We all do make mistakes. And look, it makes you seem smarter because it means that you've just read it.

That means you're a reader, right? So Adjian, huge Dutch company. It's a company that we have admired for a long time here at the Motley Fool. And they have a multi-channel strategy, things that seem like they might be easy, but really aren't when you think about it. Like, for example, you order something online, but you return it to a store. Adjian tracks all those sorts of things. And so their results for the last half year were great and fine. Their margins were lower because their take rate was a little bit lower. But Adjian's CEO, man named Peter Vanderdos, who is a co-founder of the company, has said that they are now hiring,

aggressively a lot of the software engineers who have been, who are being laid off right now from their competitors and from other Silicon Valley firms. So this is a really, really interesting company in general. They're in a great space. They are the leading competitor, even though a lot of Americans may not have heard of adgen. I think that you will be hearing of them as time goes forward because they are competing with companies like PayPal. and Block and even Visa and MasterCard on some certain levels. And this is a really important, highly successful company. Part of their announcement was the chief financial officer is being promoted to the position

of co-CEO. What's your feeling on that? Because there are a lot of times, as we've talked about in the past, there are a lot of times where the co-CEO think just doesn't work. Yeah. So this company was actually founded by by two guys, Peter Venderdos is one. So they actually have had a co-CEO for most of the history of the company. So personalities being what they are, it's a little bit dependent on how these two learn to work together. Peter Venderdos took a step back in this last year for some health reasons.

This is not a surprise to me at all. Yes, you're right to point to it as a risk. We have seen in company after company after company a failure when there are two chiefs, but, you know, as in all things, wait and see is probably the best way to go. Let's wrap up with Uber, which surprisingly posted a profit in the fourth quarter, maybe unsurprisingly record revenue to go along with that. and you throw in the strong guidance, you tell me, how good is this? How good is Uber right now? Ah, how's that? There's my response.

Okay. I will take that because I've said for years now, this is one of those businesses that if it disappeared, I think some people would set their hair on fire, but as a stock, it has not rewarded shareholders. It hasn't rewarded shareholders. It has had almost $600 million in profit. profit for the quarter, which is great, but most of that has come from their investments in other companies. From a cash flow perspective, Uber is still burning money. And that ultimately is what you need to track. So my question is, if this is the highest number of transactions that they've had, it was over 2 billion trips, what much more, what more can they do so that they actually get to be operating profitability.

And operating profitability and accounting profitability are two different things. So, yes, it was a good quarter from them. Maybe it was a better quarter than I might have expected as someone who's remained kind of an uber skeptic. But the bottom line on a revenue basis is a little bit deceiving simply because they have investments in other companies that have provided. all of that profitability. I'm glad you hit the number of trips they had, because, yeah, it's a staggering number.

But to your point, if this barely gets them over the profitability line, and as you point out, it's driven largely by their investment. I mean, this is not, you know, this is not Costco. This is not a business where it's like, well, you know, they don't really make money off the stuff they sell. They make their profit off of the subsistence. make their profit off of the subscription. It's like, all right, well, is Uber rolling out a subscription model? And are they achieving the type of renewals that Costco has achieved? Because

if they do that, now as a shareholder, I'm really interested. Yeah, that's exactly right. And it's always important to look at the quality of a company, I think, in this very important way. Is Uber unprofitable right now from an operating standpoint, because they want to be. Because Costco was unprofitable for a long time because they wanted to be. They said, we have a 2% margin, and that is fine with us and we're building, et cetera, et cetera, et cetera. For Uber, what would they be building towards? And I don't really have an answer for that. So for me, looking at Uber, I've always kind of joke that it should be renamed uber.org. And I don't really see what from this quarter would change that assessment.

You liked that, didn't you? I did like that. I've never heard you said that before. I do like that. Always great talking to you. Thanks for doing here. All right, Chris. Fox Network has sold all of the ad inventory for Super Bowl 57 with some 30-second ads

going for more than $7 million. How are those brands getting your attention before, during, and after the game? Dylan Lewis has more. Janine Pogi is the editor at Ad Age and their lead for Super Bowl coverage. She joins us from New York. Janine, I imagine this is a pretty busy week for you. Thank you so much for making the time to talk to us. Yes, thanks for having me.

It's an exciting week for sure over here. Yeah, exciting week for everyone, for fans, for folks in the ad business. 30-second spots for this year's Super Bowl started at $7 million. What exactly has to happen for that money to be well spent for advertisers? Yeah, so, you know, it's no joke when you're going and buying a Super Bowl ad ranging from anywhere from about six and a half to seven million depending upon if your grandfathered into deals and other things. But $7 million for a 30 second spot, what you're looking for is really the reach and audience and buzz, which is why you'll see many brands already as we talk on February 8th having pre-released their spots. There are a lot already out there. There were a lot of teasers, little clips of the Super Bowl ads in the last couple of weeks that came out.

You'll see a ton of social media chatter and brands really trying to build buzz on Twitter and Instagram and TikTok really looking to get as much of an audience and be a part of the conversation as possible to make those dollars worth it. Yeah, it seems almost like there is the main stage of the Super Bowl itself. but really when you're thinking about impressions and the overall reach of an ad, we have to factor in all these other digital channels as well. Absolutely. I think the days and even the week leading into the game for a lot of these brands is just as, if not sometimes more important than even game. Because there are so many moments that they can build before the game to kind of get that attention on the day of the game. You know, all that real-time chatter there is so much. It becomes increasingly more difficult to like break. through the noise of everyone in real time than they could in the moments leading up to the game. So I know we're only about halfway through Super Bowl Week, but have you seen any brands

harness that second screen approach well so far or have plans to that are kind of interesting? Well, I think one of the most interesting ones we've seen over the past couple of weeks is M&Ms, right? You know, we saw them several weeks ago make an announcement that they were doing away with their spokes candies, right? You know, leaning into some of the controversy. That has arisen with some of the political talk show host making, you know, comments about the appearance of these spokesc candies. And, you know, they kind of leaned into that. Then very shortly after, there was a big uproar over that decision. They did come back and say, hold on, you know, they'll still be around. But we have Maya Rudolph who was going to, you know, step in. And she over, you know, the past

week or so has done a lot in terms of social of, you know, pretending to change the name of Eminem's to, you know, her name to play off of her name. We've seen even the spokesc candies appear otherware on social media. So some of them taking over eBay's conversation. We've seen some on Spotify using the Snickers handle, which is part of Eminem's parent company, Mars. So they've really leaned into that social chatter and tried to do a lot. Also, with other brands to lean into other platforms. And I think, you know, in the past week, probably most people have heard about M&Ms and the stunt that they're pulling. So looking back on the advertisers from last year's Super Bowl, I think in some ways you can

kind of look at Super Bowl ads and they're an expression of the zeitgeist. And you look back to last year, automakers and electric vehicles were a major theme. Crypto was a major theme. I think e-commerce was a major theme. What are you expecting to see as themes and really present categories in the advertisers this year? Yeah, well, it's an interesting year. Very early in the fall, Anheiser-Busch, Mbev announced that they were giving up their category exclusivity, which means that other beer and alcohol brands can now buy into the game. So aside from the usual like Bud Light and Mikhailob ultra ads that we're all used to seeing from Anheiser-Bush, we'll also see a whole lot of other companies like Remi Martin, Crown Royal, Heinekenken,

Olson Cores show up for the first time in, you know, decades for some of them. So that will be an interesting category to watch and to see, you know, how those ads appear. Like you mentioned, crypto is a fun one and an interesting category last year. That won't be the case this year, you know, thanks to the crypto downturn and everything happening around FTX and that marketplace. It was interesting, though, because we spoke with Fox who was airing the game, you know, this week and they were talking about how, you know, they went out to the marketplace and their ad sales strategy and how far along they were and selling Super Bowl commercials in September. And then after everything happened, apparently there was at least a brand or two that were crypto brands that

did buy ads in the game. But then after everything happened with FTX, decided to sell those ads back. So that's just kind of interesting and just speaks to, you know, the climate and the environment and what can happen in the months leading up to the Super Bowl to change the trajectory of the brands that are advertising in the game. I think this year you'll see a lot of like the tried and true, you know, the traditional auto brands will be there. You'll see the e-trades of the world and the square spaces. They've been in, you know, multiple years. I don't think there'll be any ton of surprise. One that's interesting and new is a Web3 gaming company called Limit Break. So if we're talking about that whole Metaverse, Web 3, NFT, you know, arena, that is one that will be

interesting to watch and a newcomer in the game this year. You mentioned Fox before, and I think I saw something on Twitter just this morning, that they are going to be grossing somewhere north of $600 million in ad revenue related to the game, but that they were kind of cutting it close to the deadline. And I think I was kind of curious how much the general macro environment and the ad budget environment that we see and people tending to pull back a little bit as things get a little bit less certain, play into those Super Bowl budgets and just kind of what that timeline looks like for the planning for all this. Yeah. So as I mentioned before, and, you know, in September,

they had told us they were, they were about 95% sold out of the game, which is, you know, a pretty good place to be in September. Historically, it is always hardest to offload those last like 10 ad units. So that is not unusual and that is something, you know, no matter the climate that tends to be the hardest to sell. That being said, they did end up because of the economy, because of the crypto situation, like I mentioned before, it ended up, they backtracked a little bit. So they were at 95%. Some folks ended up selling some of the ads back. They went down a little bit. It had to make those up as they got closer to this point. The economy, for sure, they told us, played a factor in negotiations with a lot of brands taking a wait-and-see approach. and sort of saying, come back to us. We're waiting for this to happen or this to happen, which definitely slowed down probably some of the deals they would have closed sooner. But at the end of the day, as is the case.

Every year, you know, the Super Bowl ads did sell out. Commercial time is sold out. And it's pretty much on par in terms of timing with where NBC, which aired the game last year was, you know, at this point last year. Speaking of last year, Coinbase was one of the crypto advertisers that, that was very present last year. They turned their Super Bowl spot into a performance marketing piece. They had a floating QR code sending people to their site. They're not the only advertiser that has done this. We've seen PepsiCo and Rocket Mortgage take similar approaches. Is this approach

effective for advertisers? Is there anyone that's harnessed it really well? Yeah, it's really interesting. You know, they, when that happened last year, it certainly like crashed their site in the moment that it happened. It ended up winning several different ad awards, you know, for that effort, which really was just like a bouncing QR code on the screen, right? Like, that's all it was, which is fascinating how much attention it got. And I think this year we're seeing a lot of brands trying to replicate that momentum with QR codes of their own. We see Mikhailob Ultra and Netflix there working together on a spot, a golf-themed spot.

They will have a QR code appear in their ad. We are seeing avocados from Mexico, having a QR code that appears in their... their ad, and there are definitely several others that are also utilizing it, Limit Break, the Web 3 company I mentioned, they are using a QR code in the spot to then give away 10,000 NFTs. So we'll definitely see that QR codes will have a bigger presence this year. I think a lot of it too is, you know, a data play, right? And being able to gather data on consumers, even the most basic information, name, email, address, things like that, it's an entry point in for consumers potentially who are not using the brand. You know, for the

Mickelope Ultra Netflix spot, the QR code leads you to an episode, the first episode, an early viewing of Full Swing, which is a new golf show on Netflix. So it gives people the opportunity to watch that early. So there are some interesting use cases there and interesting ways to bring people into, you know, these brands in different ways. And just, I think, people find it fun to use and kind of like, well, what's this? Let's scan it and see. And, you know, and there you are engaging with the brand, which is ultimately, right, like what these brands want at the end of the day when you air a Super Bowl commercial, you want engagement with consumers. Ultimately, you want people to buy your products, but engagement is what you're looking for.

We kind of see people go after that engagement in a couple different ways. We have, you know, the folks that are big game sponsors. And then there's kind of like this separate venue of people who cannot afford those big spots but are trying to harness or, you know, hitch their wagon to the momentum of the Super Bowl and maybe some of the social chatter that's happening. Do you see anyone doing anything interesting outside of TV efforts that maybe they're not a big game sponsor, but they're trying to play into the Super Bowl advertising? Yeah, I think TikTok will play a big role in this for brands, right? Like you'll see a State Farm is doing a TikTok campaign. So they're not, they don't have a Super Bowl ad.

but they are, you know, playing on TikTok around the Super Bowl. There's a lot of brands that try to essentially like break through the clutter of the Super Bowl, like you said, without buying a commercial, whether it's because they can't afford it or, quite frankly, it just doesn't make sense for their marketing plans this year. Social media is a great way to do that. I think you'll see many brands on Game Day. to be there, right? Be on social to capitalize on the moment. I mean, you know, you go back to Oreo and what they did when there was the blackout during the Super Bowl and the moment that they

were able to say, you know, dunk in the dark. And I think that that moment resonates still because now brands are always looking. What is my moment? What is going to happen that potentially could relate to my brand that I could jump on and make it a moment for us? So I think you'll see that across the board, right, from brands who don't buy into the game looking to, whether it's Twitter or TikTok, some local advertising. I think local in recent years has been interesting brands that don't necessarily buy, you know, national ads, but will air in only a couple of marketplaces. There's a couple as an AI brand that will only run in two markets. I think San Francisco being one of them that are looking to just make a little note. and be there, but maybe not spend, you know, that $7 million to air a national spot.

I know you are busy this week, so I don't want to hold you too long, but Sunday is the big game, and it is also the big game for work for you. What exactly does the Super Bowl viewing party look like for you? Yeah. So I man Adage's Twitter account, and I will be there all night. You could follow at Ad Age, and I will be tweeting from our handle. And it mostly for me involves sitting on my couch making sure my two young children are quiet so that I could watch the ads and make sure that we are tweeting about the ads and, you know, internally we'll all be on Slack. And there's lots of both fun commentary of, as you can imagine, from a bunch of people who work for ad age on the commercials. And then, you know, a lot of business, right? Like, we are

there to cover both the news elements, things that might surprise viewers. and then just the fun of it, right? Like, this is a great moment because it is the time of year for us where, like, everyone understands what we do and covering the commercials. And, you know, even my mom will actually understand what my job is on Super Bowl Sunday, which is always enjoyable. But it's a moment that everyone is sort of, in speaking to the 100 million people tuning in to the game, there's 100 million people who are interested in commercials at a time of year when, you know,

that is rare, right? You don't see people outside of the Super Bowl really watching the commercials and going to platforms where there are oftentimes, not even any commercials. So it's just a really fun night and a time where everyone is actually interested in these ads, which is exciting for us, of course. Yeah, I think rest assured, you are not the only one staring and watching the ads. There's at least one at every party. Often most of the crowd is excited for the ads that are coming on screen. For sure, we appreciate that. Well, that was our preview for a rundown of all Super Bowl spots. Follow Janine on Twitter.

She mentioned the ad age handle, but you can also follow her at Jay Pogee. Janine, thank you so much for joining me. Thanks for having me. Enjoy the game. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy ourselves stocks based solely on what you hear. I'm Chris Hill. Thanks for listening. We'll see you tomorrow.