Red Thread

FIFA and the unshocking story of the disappearing World Cup sponsors

Whenever large sponsorship sums are involved, there is so much nonsense talked.

Take the latest news : the absence of national sponsors for the FIFA World Cup in 2018. ForbesSports Business Daily, the New York Times, the Guardian and even the usually right-talking Mark Ritson are all jumping on the bandwagon of karmic judgment. (Top marks to WSJ.)

The collective projection is that FIFA’s history of appalling governance is finally catching up, sponsors are fearful of association and that a cash crisis is looming for Gianni Infantino unless he flees to ignorant sponsors in China. Let’s take a closer look.

The coverage is based on the fact that only one domestic business – Alfa Bank – has occupied any of the 20 slots available to local sponsors. Ergo, 19 slots stand vacant. But, if we look back across the last 20 years of FIFA WC sponsorship, FIFA has never managed to sell 20 national sponsorships, or even 10. The average is six or seven. Now, while FIFA might have shown unpardonable lack of self-awareness in the past, they could never be accused of not keeping their eye on the money – so it’s hard to believe FIFA naïve enough to budget revenue for 20 local sponsors, instead of a prudent five or six.

Besides, domestic sponsors just represent the icing on the cake in terms of FIFA Marketing Rights: the lack of six domestic partners (at US$8m each) equates to less than a percentage point in broadcast rights inflation.

Financially, it really isn’t doom and gloom for FIFA : according to their 2016 accounts, 76% of revenues for the 2015 -2018 cycle were already contracted. And, as FIFA is now adhering to the new International Financial Reporting Standards, and IFRS 15 in particular, its financial reporting is very clear.

The second part of the theory is that local Russian businesses have been deterred by FIFA’s corporate reputation. Seriously?

Two reality checks here. At least.

One: sponsors simply don’t walk away from a major platform such as FIFA WC because they disapprove of the ethics of a rights-holder. Sponsors may disapprove. They may exceptionally go public. But they don’t walk away. An ambassador yes, but not a rightholder. To believe that Emirates passed up another two cycles of sponsorship because of FIFA’s behaviour is just wishful thinking.

Two: there is no evidence that sponsors are negatively impacted by rightsholder reputation. For consumers, businesses are sponsoring the World Cup – which happens to be run by FIFA. Simple as.

It’s a very whimsical notion to imagine that Russian businesses are so brand-conscious that they are turning their backs on World Cup sponsorship because of a toxic FIFA brand. There are three altogether more innocuous and more likely explanations for a lack of local sponsors.

  • the practise of sponsorship is not so developed in Russia and businesses do not fully understand how to generate value. We’re currently working in 15 markets and each market views the value and the practice of sponsorship differently;
  • the political sponsorship which delivered such staggering corporate revenues for Sochi 2014 is not present for FIFA WC 2018;
  • sponsorship of Sochi 2014 did not make for a great case study for sponsorship impact in Russia.

What’s more material – from a sponsorship perspective – is FIFA’s inability to fill its full roster of World Cup Partners, the lower tier global partners. Rights fees for these are more opaque but estimates stand at an average contract value of US$65m.  In 2014, FIFA had 8, now it has 4. So their absence is more significant – because their revenue impact is far higher and because they’re a better barometer of corporate willingness to have FIFA as a bedfellow.

Patrick Nally, who famously helped set up FIFA’s first international marketing program four decades ago, put it bluntly: “Unless you are from China or somewhere like that, …. no corporation is going to consider it safe to get involved with FIFA.”

But quite often what we see in comments like that is nothing but a form of neo-colonialism. FIFA is far from alone in looking to China: many western football teams have welcomed Chinese investment, without attracting the scorn reserved for FIFA. And, as well capitalised, commercially bullish but almost unknown Chinese mega-brands increasingly look for a world stage, FIFA WC provides a platform with incomparable value.

It is fair to say that FIFA’s reputation could put off western businesses from contracting sponsorship, but, practically, that’s a lag in perception. At Redmandarin, we were openly critical of FIFA under the direction of Sepp Blatter. But so far as reputation is concerned, FIFA is now making all the right noises to be able to claim that poor governance is a thing of the past. Given the strength of the platform it offers, potential partners will be more than happy to believe in FIFA 2.0.

What is far more plausible as an explanation is that the dubious selection of Moscow and Qatar as hosts for the next two WCs substantially reduces the appeal – and to a lesser extent the value – of sponsorship until 2026.

As soon as South Africa was announced, or Rio, it was easy to imagine a colourful, warm and exuberant celebration of world football. The largest association with Russia, on the other hand, is suspected state sponsored violence at Euro 2016. Qatar doesn’t evoke a carnival of football, but heat, bribery and an event devoid of football spirit. And although the FIFA WC is a global property, potential commercial value within the host nation is a very real factor for sponsors. In Russia and Qatar, it’s difficult to see much upside.

FIFA still has a mountain to climb. There are weaknesses with its very sponsorship model which will continue to inhibit sponsorship by B2B businesses. It risks reducing itself to a mere promotional mechanism – albeit the largest on earth. But although FIFA has been guilty of reckless arrogance and appalling governance in the past, it is changing. But large organisations are slow to turn around. Media opinion can be even slower. It’s clear that many people want to see FIFA humbled. (FIFA, a demonstration of contrition would be welcome.)

By all means, let’s keep up the scrutiny on FIFA. But let’s also be clear that sponsorship, properly practised, imposes regular commercial disciplines. And simplifications about toxic brands are rarely helpful or instructive.

Red Thread

The danger of being dazzled by the latest shiny objects in digital marketing

I imagine the entire marketing industry is now considering the impact of Proctor and Gamble’s Chief Marketing Officer, Marc Pritchard’s, groundbreaking presentation at the recent IAB Annual Leadership meeting on the issues around digital marketing.

Marc’s speech was refreshingly open and Mark Ritson in his recent Marketing Week piece describes it as the “biggest marketing speech for 20 years.” Marc Pritchard confesses that P&G has traded its usual rigour for the first mover advantage that “these shiny objects” might confer.

I don’t know whether you respond as I do, but having worked for over 30 years in advising clients about how to use sponsorship effectively, it struck me that there were parallels with the concerns Marc raises in digital marketing with issues facing brands investing in sponsorship.

Sponsorship has lots of “shiny objects” to dazzle a brand’s leadership and marketing teams and the usual rigour in marketing investment to which Marc refers can often go out of the window.  All too often there is a real lack of investment in time and internal or external experienced resource in:

  • strategic planning
  • appropriate audience segmentation
  • ROI modelling
  • clear target setting
  • evaluation methodologies

This assessment and ongoing audit process takes place for most major marketing investment but why do we still see massive investment in sponsorship assets without this process being adopted prior to, or during, significant investment in sponsorship?

Marc says “There is no sustainable advantage in a complicated, non-transparent, inefficient and fraudulent media supply chain”. He raises four major concerns for brands in their investment in digital marketing – viewability, supply chain transparency, fraud, and measurement verification. It strikes me that leaving aside potential fraud, three of these issues apply equally to investment in sponsorship.

Viewability 

Sports events’ ‘viewability’ is often represented by rights holders as ‘potential homes viewed’ or ‘broadcaster reach’. This is meaningless because it refers to the maximum potential viewers of a programme as opposed to the actual number of people viewing the programme.

Not surprisingly, those without a real understanding of programme audience measurement methodology get confused by the base data on which so much of the value of sports sponsorship platforms is still based. Compounding the problem, there is no consistent global audience measurement system, as audiences are measured differently in different markets.

Measurement verification

The problems with viewability and measurement verification are linked. We know the challenge of sponsorship value measurement – and the use of ‘equivalent media value’ as verification of value measurement. The many methodologies in calculating equivalent media value with discounts for ‘limited viewability’ or contrived justifications for premia are a complete smokescreen for assessing the measurement of the value of a sponsorship platform.

Measurement of any sponsorship must be based on an assessment of the actually anticipated outputs of a partnership for a brand whatever they may be, for example – relevant exposure in a new market, the targeting of a key audience, an association to move brand perceptions leading to consideration and purchase, supporting a clear CSR positioning, providing a powerful platform for retaining and recruiting talent etc.

These are the measurable outputs from a sponsorship partnership which must have ongoing measurement processes in place, prior to the securing of sponsorship assets, to enable the monitoring of progress and the finessing of campaign strategies and execution.

Measurement verification costs money and maybe even jobs if things don’t quite work out as planned, but as Marc Pritchard says, responsible marketers investment in any marketing investment must be transparent and accountable.

Supply chain transparency 

Even companies as sophisticated as P&G were unaware of the dissipation of their money i.e. what is actually spent on digital media, once the fees have been paid in the execution of digital media campaigns, in an opaque media placement process.

P&G were also were surprised at the assumptions they had made about their media agencies; they wrongly assumed they were batting exclusively on their side which, upon closer examination of the structure of their contracts with agencies, was not quite how it was in reality.

If clients looked at the activation of their sponsorship campaigns they may well find potentially a similar picture. Sponsorship campaigns are often complex and multi-channeled. A lead activation agency may frequently sub-contract to specialist agencies unbeknown to the client. Are there clear lines of responsibility to avoid unnecessary duplication, between the lead agency and the sub-contracted agency in terms of delivered outputs? Are contracts transparent between a lead activation agency, acting as the principal in the negotiation with rights holders? Are fees the agency may be receiving from the rights holder for securing a sponsor, disclosed?

The worst cases have been recent scandals around sponsorship managers collaborating with agencies to circumvent their own personal sign-off levels or funnelling money through their agencies to rent houses or pay for entertainment at events for their personal benefit.

More sophisticated clients are starting to identify the value that a company’s procurement team can bring in helping to address their assessment of how they approach the planning, activation and measurement of sponsorship, as long as they have an appropriate understanding of the reality of how the sponsorship market operates. Greater transparency in the sponsorship area would mean that clients would understand exactly what money is reaching its target and what is being diluted by undeclared management fees, commissions etc.

This will also highlight to clients the nature of the relationship they have with their sponsorship activation businesses and indeed the relationships their agencies have with rights holders. Does this issue over the transparency of agency remuneration sound familiar? As P&G have found to their cost – if you are not asking the right questions of your agencies you may be labouring under false assumptions.

Whether clients will be so distracted, trying to get their heads round exactly what digital marketing and their digital agencies are delivering and at what real cost, that sponsorship’s less than rigorous planning, execution and measurement processes will remain outside the radar of scrutiny, I do not know. I rather hope that the issues raised by Marc Pritchard may be an early warning siren for all participants in the sponsorship business to sharpen up their acts and deliver real measurable and importantly sustainable value to all parties through a more rigorous and professional approach. As Marc Pritchard said, better advertising drives growth. This equally applies to sponsorship.

So what is to be done? Let us see the more rigorous planning of sponsorship using best practice approaches adopted in other areas of marketing investment such as:

  • developing a strategic framework
  • proper audience segmentation
  • identifying a clear business case
  • clear target-setting
  • detailed negotiation strategy
  • developing a compelling sponsorship proposition and messaging hierarchy
  • organisational development and capability building
  • ongoing evaluation methodologies
  • transparency and accountability on activation delivery
  • transparent contracts and between all key rights-holders and agencies

We know how powerful, strategically driven and creatively executed sponsorship campaigns can be. But there are still too many sponsorship campaigns which simply do not make sense to the consumer and therefore have minimal impact because they have not been thought through properly. Marc Pritchard’s next groundbreaking speech may be addressed to the sponsorship industry, although it will probably come from the marketing leadership of another major global advertiser as P&G were responsible for ‘Thank You Mom!’ one of the most outstanding Olympic sponsorship campaigns of recent years.