How TV and Internet Ads Influence Your Investing Decisions
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Tuning into the Super Bowl this weekend? Think twice before opening your wallet during the commercial breaks.
In the last several years, commercials for investing products have made a splash during the big game (remember FTX's infamous Larry David ad?). But the companies behind them aren’t paying millions of dollars for those spots just to make you laugh. They want your money, and they have sneaky ways of getting it.
Super Bowl ads are a perfect example of how advertisers regularly employ subversive strategies on TV and social media to attract investments. Recognizing the factors that influence your investing decisions — and knowing how to withstand those appeals — can help you make sound choices with your money, regardless of whether the Chiefs or the 49ers notch the win.
How advertisers influence your investing
Companies have long employed a variety of tactics to attract your money, from building rapport, to playing on your fears, to making you feel like you urgently need to buy something. The rise of social media has simply given advertisers a new way to reach customers.
Dan Egan, head of behavioral finance at Betterment, says the internet has encouraged shorter attention spans, which in turn has changed many companies' approach to marketing. They have stripped back the amount of information they put in commercials, favoring exciting visuals over education.
Advertisers have capitalized on our collectively diminished attention span by keeping commercials punchy — often at the expense of actually telling viewers about the product.
Recall the Coinbase Super Bowl commercial from two years ago. That bouncing QR code got people’s attention — so many viewers scanned the code for free bitcoin that Coinbase briefly crashed — but it didn’t teach investors what crypto is or even touch on why it may be a good investment.
By putting the sign-up right in front of viewers and offering an incentive, the company eliminated barriers for viewers who wanted to become users of the platform. Would Coinbase have gotten the near-300% increase in sign-ups it did if it had unleashed a ton of jargon-filled crypto data on TV instead? Probably not.
Another common advertising approach centers around evoking hype, fear or other strong emotions that cause investors to act fast. The 2022 Super Bowl commercials from crypto exchange FTX, for example, played heavily on FOMO, or fear of missing out, by having David's characters reject groundbreaking technologies that later changed history.
The implied message? FTX is the next big thing, so ignoring it would be a big mistake. (FTX later collapsed, and its founder was convicted of fraud.)
Broadly, Egan’s theory is that the social media landscape is causing “information overload” for investors. News cycles are moving dramatically faster than ever before, and it's bleeding over into public perception.
Even though it may be smarter to invest for the long term, it's become “almost odd to be like, ‘I'm holding this thing for 20 years,’” he says.
The result of this is that it is easier to push investors toward quick decisions. Creating a sense of urgency forces the consumer to think fast: Should you buy now before the investment takes off? Should you wait at the risk of missing out? Pushing investors to think and act rapidly can help to bring in more dollars; consumers with more time to think pragmatically may hesitate or dissuade themselves.
Perhaps the most obvious tactic that advertisers employ to influence investors is familiarity. The more a company can get in front of a consumer, the more likely they are to stick in that person’s mind. Egan says this is especially true in the crowded, complex world of investing.
“A lot of investing advertising isn't about the quality of the product or the details or who it's for,” he says. Instead, “it's often about familiarity” because people who feel overwhelmed will inevitably choose to rely on what they know.
For a fund like Invesco’s QQQ ETF, advertised frequently during the NCAA's March Madness basketball tournaments, familiarity could mean the difference between getting selected by an investor for their 401(k) and being passed up for another.
All of these techniques are frequently combined with celebrity endorsements to build additional goodwill with investors. But this tactic has come under fire, especially in the crypto space, in recent years. (A handful of celebrities, including Kim Kardashian, Lindsey Lohan and Floyd Mayweather, were sued for posting undisclosed crypto ads that ended up costing investors.)
For his part, David has expressed plenty of regret for his endorsement of FTX just months before its implosion. In an interview with the Associated Press, the comedian called himself "an idiot" for taking part in the ad on the advice of pro-crypto friends. He also admitted that he lost "a lot" of money doing it, as he agreed to take part of his payment in crypto.
How investors can tune out the noise
It's fine to enjoy Super Bowl commercials — but it's also important to recognize that ads everywhere have influence on your choices as an investor, whether or not you realize it. Try not to let something you see during the big game or online derail your long-term investing vision (ideally developed with the help of a financial advisor).
If you want to become more resilient, Egan says you should remember your priorities and long-term financial goals before you buy something: “Keeping the purpose in mind when making decisions removes reactivity and helps you think more holistically,” he says.
To that end, you should schedule time to review your finances quarterly. By periodically gauging how you are doing and whether you need to make changes to your investing strategy, you're planning calmly — not leaving yourself open to the panic and rash decision-making that can occur when you sporadically check your portfolio.
Limiting time on social media is another way to build up a resistance to the overload of information online. Putting distance between yourself and the waterfall of constant financial news and data online will lead to less reactivity (and the potential to ruin any good long-term progress you're making).
You can curate your news feed to pay greater attention to what you want and tune out the other noise. Then move deliberately.
“Pick an important topic — taxes, account types, diversification, rebalancing — and chew on it for a while 'til you feel like you could explain it to someone else confidently,” Egan says.
Most importantly, don’t take what ads or social media echo chambers say about an investment at face value. Egan suggests seeking out alternative views to avoid herd mentality and get the full picture of the good or service before you buy, considering its true impact on your overall financial goals.
“Try to search out ‘why might this be wrong?’ rather than ‘why am I right?’” he says.
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