Two days ago, I said to a group of friends, “Who would ever put gold in an envelope and expect to see any money in return?” The whole business model just didn’t seem ethical. It reminded me of my high school days, when I used to stay up late and watch a gold miner on TV sell his “Gold Panning Kit” to any moron who was drunk enough to dial at 3 am. I was so wrong. Cash4Gold is legit and it’s dropping $3 million for one of the few available Super Bowl ads. At least in the modern era, this marks the first time a direct response advertiser will join the ranks of Budweiser, Pepsi and Coca-Cola.
Is this a bad move for Cash4Gold? According to Nielsen, the company spent over $160 million in advertising for 2008. The company claims it will refine around 200,000 ounces of gold in 2009– that’s only $180 million gross ($900/ounce). I’m guessing the company pays around 65% of the gold’s market value back to the customer. So, a $63 million profit is far short of the $160 million it’s spending in advertising.
What gives? Why not stick with the easy, affordable world of direct response? What benefits would there be to spend $3 million on one, 30 second spot? Think of the volume of DR spots you could buy up with this kind of dough.
Cash4Gold has enlisted the help of MC Hammer and Ed McMahon to deliver their message—two images of self-destruction in their own right. It’s pretty obvious that the company needs to bring legitimacy to its brand, but is it worth the hefty price tag? Other “onliners” have seen success, GoDaddy.com managed to separate from the pack when they were virtually unknown and CareerBuilder.com claimed a 68% increase in online job applications directly after the big game. But will the past success of others translate when the current economy is teetering on an implosion of its own? Personally, I’d rather talk about punching a koala bear, or where I was when the Jackson nip-slip happened.
Good luck Cash4Gold and “Please Hammer Don’t Hurt ‘Em.”
