140 replies to this topic

[anneomoly]

As all Red Bull drivers he's been nicely funded by Red Bull through his career and now he needs to pay that back. Vettel was also on a low retainer when he first started in F1 and joined the Red Bull teams. 

 

I think Vettel was on relatively low basic pay throughout his time at Red Bull wasn't he? For a world champion anyway. I thought one of the reasons Ricciardo was a cheap option in 2014 was that Red Bull might have to give Vettel a significant pay rise to match a big name signing? As you say, Red Bull put their money and their faith in the kids, but in return they retain the right to either kick them to the curb if they're no good or retain them for cheap if they are. The savings on Vettel and - this year - Ricciardo - probably funded not only their own junior careers but half a dozen other kids as well.

 

People often critic the amount of salary a sports person make over the course of his/her career, or even year. But why? Getting involved in sports is not easy at all. The mental preparation, sacrifice, etc, it takes helluva lot of dedication, discipline, and of course practice. 

 

Most sports people have a career of less than 15 years, if they are lucky. One major injury, and you will fast become yesterday's news. I play sports, notably badminton and football. It's crazy the amount of time i take to recover from practice and games. The food intake, the sleep, the rest, protein intake...sometimes, it feels like there's no life. 

 

Hence, i never gotten why their salaries get questioned. Not everyone can become a professional sports person. Especially in the case of racing drivers, you career or life, can be over in an instant. 

 

You forgot the massive financial risk and investment as well. The overwhelming majority of kids who spend £250,000 a year to go karting end up with nothing except exam results that are about 3 grades lower than they would have been if they hadn't skipped school constantly and parents who are significantly poorer. For the one in a hundred who manage to make their living 100% in cars (which doesn't include a lot of say, the BTCC grid), most of them still aren't 'rich' by sports star standards even if they're comfortable by normal person standards.

 

It's like any high risk high reward profession. Yes, Brad Pitt earns millions but for every one of him there's a hundred people touring Shakespeare in schools or waitressing in LA.

[PARAZAR]

Nico and Kimi better paid than Jenson. Alonso on 35 while Jenson is on 10. 

[Ross Stonefeld]

 

While the absolute $ amounts are pretty big for an average Joe the F1 follower, in relative $ terms Max could not be more wrong.   Sponsors realize boat loads of ROI in F1.   Santander's bad year ROI was no less than x 4 what they put into F1 and in better years their return on investment was as high as x 11.   You cannot get that kind of return anywhere else.  

 

So why isn't F1 rammed full of sponsors? Those are incredible returns. Santander would be getting 4x what they paid in advertising value if they're lucky. I kinda doubt they're getting 4x in new business, definitely not 4x in new profits. Unless they managed to get something like the debt servicing on the CVC buyout. Which I think went to RBS?

[Rocket73]

Seems the drivers are simply playing the 'eating' game better than you. As for looking at the site, the © is on the landing page, plus I didn't buy anything - that's capitalism at work, as it is with team bosses, who have the right to choose to buy/pay.

 

Wow! what's your problem? 

[Rocket73]

Free-market economy pulled out millions of people from (extreme) poverty in ex-commie countries. But I guess social justice is more important than full stomach   

 

hah coz there's no poverty caused by capitalism? 

 

It's fascinating how reactionary pro capitalists get when you question it.

[New Britain]

Typical Mosley shameless hypocrisy - wanting to cut the money to the stars whom the fans actually wish to see, whilst remaining completely silent about the leeches that are bleeding the sport dry.

[warp]

Nico and Kimi better paid than Jenson. Alonso on 35 while Jenson is on 10. 

 

I don't see the logic with the first two ones, to be honest. Probably Kimi just because Ferrari normally pays good money for drivers.

 

Fernando is a double champion and arguably top-three in the grid and while maybe not worth three times as much as Jenson, I can see how he may be worth more than Button. Each driver sells himself differently, I guess.

[Jimisgod]

Why McLaren and Mercedes respectively are paying Alonso and Hamilton those kind of moneys is totally absurd.

 

Alonso makes no difference in McLaren's shitbox of a car, while Mercedes has a car that Maldonado would be WDC in.

 

To get from 18th to 8th in 5 or 6 races shows they are assisting in development though.

[wrcva]

Not so certain about that, reality seems to be that sponsors are leaving F1.

 

So why isn't F1 rammed full of sponsors? Those are incredible returns. Santander would be getting 4x what they paid in advertising value if they're lucky. I kinda doubt they're getting 4x in new business, definitely not 4x in new profits. Unless they managed to get something like the debt servicing on the CVC buyout. Which I think went to RBS?

 

I do not think it is the costs but uncertainty surrounding F1 probably is the most important issue for prospective sponsors (plus the world economy is not exactly out of recession).   When venues are changing on the fly how do you expect sponsors to plan for their target markets?   Numbers (audience geo-demographics, ad exposure...) do matter to each sponsor (before they sink their cold cash into some adventure with so many unknowns).   We do not see money problems with the top teams but a significant issue for the smaller teams is their own credibility.   Sponsor board rooms want stability and do not like their brands to be associated with other not so reputable characters or brands of questionable reputation. Some of stunts both Lopez and Monisha pulled are not good references to attract sponsors.   In that line of thinking even Ron taking front stage role was a bad idea for McLaren's future imo.   The fact that Bernie has been spending his free time at various courts cannot possibly help either.   As far as the racing and pinnacle of technology stuff forget about sponsors, even teams themselves are having hard time understanding what the future may hold on the rules front.   Charlie may screw with something (tire compounds) next month, or bring another in season game changer and alter outcomes with zero accountability.  Again, as far as stability or lack there of FIA is a huge part of the problem, and when going gets tough they push Bernie to take public whacking (even if the guy is right, the wealth thing flares up negative passions, Bernie being a Luddite is not a good thing either).   

 

Ross:

 

Santander VP Cendoya certainly believes the sponsorship has been a huge success. In the first year, the return was probably five euros in return for every euro of investment, the second year it was four euros to one, and the third we don't know exactly yet [as the 2009 sponsorship has not yet ended]. That's the return on investment, including commercial campaigns.(link).  I cannot find the link but the same guy claimed x 8 ROI after McLaren to Ferrari switch.  

 

Bank of America Sports sponsorship ROI (non- F1 but good comparative reference):

The bank claims to make $3 of profit for every $1 it spends on sports marketing, a rate of return that may look too good to be true (if it can make 300%, it should do nothing else). The long-term deal with the Yankees, says Ray Bednar, BofA's head of sponsorships, “worked fantastically from a return-on-investment perspective, but the environment was wrong. We walked away from a lot of revenue and profit.” (link) 

 

I think Bernie is fully aware of ROI possibilities so he does not even blink an eye cutting off some circuits that are hang up on affordability of F1.   Here is another reference data for ROI for local economies (old data but gives some idea about the crazy returns could be for the race hosts if they do their homework- (link).   

 

So, Max thinks it a cost problem, but Bernie thinks it is a sales problem.  I think data is on Bernie's side, especially after considering the fact that PU costs have doubled with the switch from V8 to V6T, which was Max's flagship cost cutting idea  .  

 

Anyway, we are getting off topic a bit but earnings of drivers are the least of F1's problems, imo

[ray b]

there is no cash prize for being WDC

 

THERE IS NO CASH IN A RACE WIN to the driver

 

that is odd from the USA practice

 

yes I know some have bonus contracts

and points are money to the teams

 

but the sport CVC B E  should reward the champ

 

and max was way over paid and then got a huge bribe

[Rinehart]

Well RBR is a good example this year then if they're paying less than $3 million for at least one very good driver and still totally suck with the extra $47 million to develop. And from all the chatter they may lose their one good driver.

The reason why Daniel is on a comparatively low salary is he's still on the deal that he signed to get the RBR drive only 18 months ago when Webber retired. They will have to pay a lot more to keep him. This actually proves my point.

[Rinehart]

Why McLaren and Mercedes respectively are paying Alonso and Hamilton those kind of moneys is totally absurd.

 

Alonso makes no difference in McLaren's shitbox of a car, while Mercedes has a car that Maldonado would be WDC in.

You really think Alonso makes no difference to McLaren over you and you think Maldonado would beat Rosberg to the title, or even the moderately competitive Ferrari with Vettel? 

 

Ok.. 

[Rinehart]

Nico and Kimi better paid than Jenson. Alonso on 35 while Jenson is on 10. 

It's just market forces, there are reasons for this disparity just as DR is on only $3m or whatever. The size of a driver's salary is not always perfectly aligned to their ability - Senna once offered to drive for free because he wanted a winning car so much.

 

In this instance, McLaren/Honda wanted to sign the best possible driver as a talisman to lead their new era and to lure Alonso away from Ferrari, Fernando was in the box seat in negotiating terms. Conversely that left JB and Magnussen to fight over the other seat and with McLaren safe in the knowledge that they had procured Alonso, and JB was desperate to remain at McLaren, Jenson's salary actually represents a pretty handsome reward, given he basically had no negotiating position whatsoever. To put it in perspective, had Alonso turned McLaren down, I think you'd find that JB would have been offered significantly more as the power shifted to his side of the table.  

[Rasputin]

You really think Alonso makes no difference to McLaren over you and you think Maldonado would beat Rosberg to the title, or even the moderately competitive Ferrari with Vettel? 

 

Ok.. 

Alonso might make the difference between Q1 and Q2, but why do they pay him 2+ MUSD per race to do that?

 

Maldonado might not beat Rosberg in a Mercedes, but he would certainly be WDC without a team-mate.

[velgajski1]

hah coz there's no poverty caused by capitalism? 

 

It's fascinating how reactionary pro capitalists get when you question it.

 

To prove that capitalism causes poverty you first need to have another system with less poverty getting replaced by capitalism and resulting in more poverty. With communism this was very often the case (caused more poverty in many countries where it was implemented) and it is exact reason why so little countries today rely on 'proletariat dictatorship' to make decisions about economy. People figured out its not that good in the long run.

Edited by velgajski1, 03 June 2015 - 08:51.

[Rinehart]

Alonso might make the difference between Q1 and Q2, but why do they pay him 2+ MUSD per race to do that?

 

Maldonado might not beat Rosberg in a Mercedes, but he would certainly be WDC without a team-mate.

I struggle to believe that you actually mean some of the things you post. 

A fantasy scenario where Mercedes is a one car team, is relevant how in the context of the value of drivers???

[Rasputin]

I struggle to believe that you actually mean some of the things you post. 

A fantasy scenario where Mercedes is a one car team, is relevant how in the context of the value of drivers???

You obviously try to misread everything I post, so let me try this in another way;

 

Mercedes does not need to pay anyone 50 MUSD per season to win most races, the WDC and the WCC.

[Rinehart]

You obviously try to misread everything I post, so let me try this in another way;

 

Mercedes does not need to pay anyone 50 MUSD per season to win most races, the WDC and the WCC.

Yes, they do.

 

If Mercedes did not have 2 of the top drivers in the world, it would be a farcical undermining of the $1b investment that Mercedes have made in F1.

 

What is the point in spending all that money to develop the best car in F1, only for it to be driven by 2 drivers who are not amongst the best drivers in F1? 

 

If this argument hinges on your opinion that you could just stick a pair of Maldonado's in the car and it would still win, then we've reached checkmate because I think that is an absolutely ludicrous assumption. And why even take the risk when the budget to pay for the drivers is their anyway???

Edited by Rinehart, 03 June 2015 - 10:32.

[Clatter]

.....and nobody attends to the races.......

10 years ago they had higher salaries but the prices for the tickets where much lower. The teams don't demand more money from Bernie because the drivers want more money, they demand more money because the cost structures (especially of the research and development departmend) increased heavily.

10 years ago there was a lot more sponsor money around.

[Brazzers]

How did Irvine get so much money? 

 

 

End of the day, the market determines the price for everything. 

Edited by Brazzers, 03 June 2015 - 11:08.

[Ross Stonefeld]

Ross:
 
Santander VP Cendoya certainly believes the sponsorship has been a huge success. In the first year, the return was probably five euros in return for every euro of investment, the second year it was four euros to one, and the third we don't know exactly yet [as the 2009 sponsorship has not yet ended]. That's the return on investment, including commercial campaigns.(link).  I cannot find the link but the same guy claimed x 8 ROI after McLaren to Ferrari switch.  
 
Bank of America Sports sponsorship ROI (non- F1 but good comparative reference):
The bank claims to make $3 of profit for every $1 it spends on sports marketing, a rate of return that may look too good to be true (if it can make 300%, it should do nothing else). The long-term deal with the Yankees, says Ray Bednar, BofA's head of sponsorships, “worked fantastically from a return-on-investment perspective, but the environment was wrong. We walked away from a lot of revenue and profit.” (link) 
 
I think Bernie is fully aware of ROI possibilities so he does not even blink an eye cutting off some circuits that are hang up on affordability of F1.   Here is another reference data for ROI for local economies (old data but gives some idea about the crazy returns could be for the race hosts if they do their homework- (link).

I find that bit basically impossible to believe. A bank, a bank of all places with all their 'ethical' missteps, walked away from easy money? Right...

[AustinF1]

According to this new article, for 2015 ALO earns $39M, VET $30M, HAM $28M, and so on...

 

Alonso still highest paid driver in 2015: http://www.f1reports...Yh8IGwI.twitter

[Jon83]

How did Irvine get so much money? 

 

 

End of the day, the market determines the price for everything. 

 

He's obviously quite an astute businessman (as shown since leaving F1) 

[Requiem84]

You obviously try to misread everything I post, so let me try this in another way;

Mercedes does not need to pay anyone 50 MUSD per season to win most races, the WDC and the WCC.

Easy to say woth hindsight regarding 2014. But what if Ferrari brings a 40hp engine improvemdnt to montreal this weekend and is within 0,1 of Merc.

With 2 Madonado's, mercs would qualify behind, and at least one maldonado would crash out somewhere.

When signing a driver, you never know how good your car is going to be in remation to the competition. If the car turns out to be a rocket, you can't suddenly pay your drivers less.

[Gareth]

Santander VP Cendoya certainly believes the sponsorship has been a huge success. In the first year, the return was probably five euros in return for every euro of investment, the second year it was four euros to one, and the third we don't know exactly yet [as the 2009 sponsorship has not yet ended]. That's the return on investment, including commercial campaigns.(link).  I cannot find the link but the same guy claimed x 8 ROI after McLaren to Ferrari switch.  

 

Bank of America Sports sponsorship ROI (non- F1 but good comparative reference):

The bank claims to make $3 of profit for every $1 it spends on sports marketing, a rate of return that may look too good to be true (if it can make 300%, it should do nothing else). The long-term deal with the Yankees, says Ray Bednar, BofA's head of sponsorships, “worked fantastically from a return-on-investment perspective, but the environment was wrong. We walked away from a lot of revenue and profit.” (link) 

How do they calculate RoI for marketing campaigns?

 

Is it media exposure vs cost for the equivalent media exposure via advertising (ie having my name on the car cost me $x and got me y amount of TV time; y amount of TV time would have cost me $z; $z divided by $x = 8, so I have an 8x RoI) or is it revenue directly attributable to the campaign vs cost (in which case how do they measure the revenue)?  Or something else?

[Ross Stonefeld]

If they're claiming $3 profit for every $1 sponsorship, they're spending 100m a year and getting 400m in profit(so more than 400m in income). Banks have pretty fat margins but that seems questionable to me. Even more so that they'd walk away, so maybe they couldn't verify the ROI as much as they thought...

[Melbourne Park]

Teams secure drivers for large sums, but part of that process is a contract that goes for several years. 

 

 

One way to lower driver payments is to restrict contracts to just one year.

 

If that was the case now, there'd be a queue of good drivers trying to get a Mercedes drive for next year. And that would push down Hamilton's pay. Meanwhile at Ferrari, Daniel Ricciardo would be wanting a Ferrari drive for next year, and that would push down Vettel's pay.

 

With the money the team saved from ridiculous wages, the top teams could afford a third car. More cars is better IMO.

 

I've pretty much lost touch with how good the drivers really are. For instance, Vettel looked slow last year, but this year he's trouncing someone who was highly respected.  I am no longer comfortable with a formula that IMO now hides drivers' comparative skills. Short contracts with drivers moving around would reveal much more about the drivers. And the cars too IMO. 

 

 

Edited by Melbourne Park, 03 June 2015 - 14:40.

[Jimisgod]

He's obviously quite an astute businessman (as shown since leaving F1) 

 

Bwhaha

 

http://www.independe...ht-9050879.html

 

Or he knows a very astute financial planner.

[mclarensmps]

How did Irvine get so much money? 

 

 

End of the day, the market determines the price for everything. 

 

But it's still flawed because the market is swamped by consumers who cannot fulfil their owed obligations...

[Rasputin]

 

Santander VP Cendoya certainly believes the sponsorship has been a huge success. In the first year, the return was probably five euros in return for every euro of investment, the second year it was four euros to one, and the third we don't know exactly yet [as the 2009 sponsorship has not yet ended]. That's the return on investment, including commercial campaigns.(link).  I cannot find the link but the same guy claimed x 8 ROI after McLaren to Ferrari switch.  

 

Bank of America Sports sponsorship ROI (non- F1 but good comparative reference):

The bank claims to make $3 of profit for every $1 it spends on sports marketing, a rate of return that may look too good to be true (if it can make 300%, it should do nothing else). The long-term deal with the Yankees, says Ray Bednar, BofA's head of sponsorships, “worked fantastically from a return-on-investment perspective, but the environment was wrong. We walked away from a lot of revenue and profit.” (link) 

 

 

This is most certainly utter nonsense, first of all, how can you possibly measure that?

 

Secondly, this is bank executives talking, the very same executives that are greased in FOM's hospitality-suites with celebrities and big boob babes.

 

Just good old corruption.

[New Britain]

Something to keep in mind when contemplating the expected value to a potential F1 sponsor:

 

- The valuation numbers are usually composed by consultants who are employed by the teams (or drivers) who are trying to sell themselves to potential sponsors. The consultants will compose the numbers in whatever way makes their clients seem the most valuable to those potential sponsors. The true valuation, whilst impossible to ascertain, is likely to be lower than the consultants' estimate.

 

- The value of sponsorship - regardless of how a given team or driver is doing - is going to change over time. Many sponsors are aiming to raise awareness of themselves amongst a specific target audience. Once that awareness has been achieved, the impact of future sponsorship is expected to be lower. For example, Vodafone, when they announced that they would not be renewing their deal with McLaren, stated clearly that their original objective of raising global awareness of their brand had been achieved, and thus the future value to them of visibility in F1 was likely to be less than what it had been.

 

- Even if one accepts that a given sponsor could get, say, a 4x return on its money via F1 sponsorship, that does not preclude that the same sponsor might get a 5x return on its money by sponsorship in a different medium aimed at the same target audience.

Edited by New Britain, 03 June 2015 - 18:24.

[Rhardrks]

Yes, they do.

 

If Mercedes did not have 2 of the top drivers in the world, it would be a farcical undermining of the $1b investment that Mercedes have made in F1.

 

What is the point in spending all that money to develop the best car in F1, only for it to be driven by 2 drivers who are not amongst the best drivers in F1? 

 

If this argument hinges on your opinion that you could just stick a pair of Maldonado's in the car and it would still win, then we've reached checkmate because I think that is an absolutely ludicrous assumption. And why even take the risk when the budget to pay for the drivers is their anyway???

 

I think you are over emphasizing the amount a driver makes a difference in relation to the car. Maldonado showed in Spain 2012 that he can easily get pole and drive off in the distance when he has the best car for a given race. He's only had that for 1 race in his career so far.

In the Mercedes he wouldn't have to push and make mistakes as the car advantage is so huge.
 

[Rinehart]

I think you are over emphasizing the amount a driver makes a difference in relation to the car. Maldonado showed in Spain 2012 that he can easily get pole and drive off in the distance when he has the best car for a given race. He's only had that for 1 race in his career so far.

In the Mercedes he wouldn't have to push and make mistakes as the car advantage is so huge.
 

I think your over emphasizing the significance of 1 race.

 

Lets break this down: The supposition from another poster is that Mercedes don't need to be spending $50m per year on 2 top drivers and a couple of Maldonado's would do because apparently there is next to no difference between them. You support this by stating that even Maldonado can win with a significant car advantage.

 

Ok, so, rewind the clock and in 2010, Mercedes sign a pair of Maldonado's for free. I put it to you that had that been the case, the rate and success of developing performance of the Mercedes F1 car would not have been as steep or as productive as it has been. As it was there are a number of races that Mercedes qualified at the front or won by small margins (such as Austria 2014, Malaysia 2015) even with Rosberg and Hamilton at the wheel that I reckon would not have been won by a Maldonado and of course my theory is that the Mercedes would not be as strong if developed with Maldonado so that would bring a lot more races into the close and therefore not won category. And this is all rather favorably for the Maldonado case based on a consistent performance gap assumption, whereas I suspect with a pair of Maldonado's there would be greater inconsistency leading to further points leakage. To emphasise the point, we only need to look at the many examples of the points differentials where a top driver is paired with a lesser teammate to see that Maldonado is unlikely to score anywhere close to the totals that top drivers are able to.

 

The consequence of this would be lower constructors championship finishes leading to less income leading to less budget for Mercedes to spend developing the car. A lesser performing car would lead to greater difficulty to attract top engineering talent to the team as well as retain the ones they've got. Before you know it, Mercedes are holding board meetings... 

 

In essence it boils down to the fact that whilst there might not be much performance gap between Maldonado and a Ros/Ham over one lap - and perhaps not enough to make a difference in 1 race with a superior car/tyre advantage - it's getting into that position and doing it consistently where I believe there is a significant gap that cannot be emphasized enough for anyone who thinks F1 is all about the car.

 

The core point remains though, what sort of bonkers strategy would involve investing $1b to attract the best people to design and build the best car and engine only to NOT attempt to sign the best possible drivers. It would be ludicrous beyond words. 

Edited by Rinehart, 04 June 2015 - 09:56.

[wrcva]

How do they calculate RoI for marketing campaigns?

 

Is it media exposure vs cost for the equivalent media exposure via advertising (ie having my name on the car cost me $x and got me y amount of TV time; y amount of TV time would have cost me $z; $z divided by $x = 8, so I have an 8x RoI) or is it revenue directly attributable to the campaign vs cost (in which case how do they measure the revenue)?  Or something else?

 

I am not totally sure as each organization have their way of looking at various metrics in various dimensions but ROI calculations generally attempt at measuring some financial outcome as a consequence of the media "buy" on various channels (TV, Radio, Word of Mouth, online... so on) and/or other sales enhancement & customer retention activities.   Exposure (ad or logo or whatever other stimuli) can and will impact any of the levels in following funnels. 

(image credit: get2growth.com)

 

Objective being to push people into the funnel as deep as you can, sponsorships add a cross sectional emotional dimension to people's decision making (vs. traditional marketing campaigns that tell you to buy something because it is good).   ie. you might be totally indifferent (on the fence) about using Blackberry smartphone as far as it's features and performance, but as soon as you see your hero, say Hamilton, flash his BB during FIA press conference, you might go ahead and accept that implicit endorsement because that emotional connection alters your thinking resulting in you giving BB a try or if you were already using BB, you may not switch to Iphone or android for another year or if you were hating BB you may start not hating them as much...   Bottom line is your thinking and actions are altered positively for BB, simply because of your perception of Ham (your brain neutralizing negatives, and converting indifference into positive action), and that happening without you even seeing a particular BB ad but just seeing your "hero" using his "sponsored" smartphone.  Another example: There are 100s of thousands of people who are using Ferrari credit card (issued by Santander as a part of their sponsorship activity).  I would speculate that if you were to pull Ferrari out of that equation, maybe only 10% of those folks with Ferrari CC would have get that card because it is a Santander card.  That calculus would further change as you include drivers into the mix in different geo-demographic situations...  So, people's Ferrari emotions are enabling or activating and engaging positive perceptions of Santander goods and services whereby both are making loads of money in fees and finance charges.

 

I think that is the beauty of sponsorship that it makes the connection between your emotions and rational actions for the benefit of the product or service in question anywhere, anytime without being exposed to some silly TV ad that you may even skip...  Now, how do you measure this without extensive research as to what was the key reason for people's actions as you try to push and keep people into various stages of the funnel seen in the image?  

 

So, while traditional ad exposure (per click, per view so on) could be simpler to approximate based on unit cost and unit sales increase type of metrics, sponsorship ROI is more like sausage making.  As others have pointed out sometimes the executives involved do have motives for showing what a "great job" they are doing, but given the trends in sponsorships vs. traditional marketing, sponsorships must be working very well for most companies. Even if traditional ads feature sports heros they are not as effective because continuous "engagement" you have with cross branded sponsorship is not there or not as long lasting.   The analytics side is pretty complex as you have to do a lot of extrapolations based on models (which are based on many assumptions).  

 

I still think Max is wrong or just pushing his cost cap agenda which also is wrong.   This statement from Santander Advertising and Sponsorship exec is pretty telling how wrong; 

 

“In Formula One, we are sponsoring circuits, teams and drivers because the driver is an excellent asset to connect with the customer. The circuit is a message of supporting the country. The team is how we can manage the emotional assets around the sponsorship, but the driver allows us to connect with the customers and to develop commercial promotions.”  (x)

[Ross Stonefeld]

Hasn't Santander been pulling back from their event sponsorship in F1?

[wrcva]

Hasn't Santander been pulling back from their event sponsorship in F1?

 

I think they are.  Things are different in the post Botin era as he probably was the key driver for F1 involvement.   They are just executing their Ferrari sponsorship contract.    

[MustangSally]

Hmmmm . . . interesting replies, but I still don't think the handful of drivers who do get paid, are overpaid.

 

I'd agree with the posters who suggested that this would (a) be a useful controversy for MM's upcoming book and (b) a distraction from the other costs of competing, rather than just participating, in F1.

 

Note that the 'net wealth' table of F1's richest wouldn't buy them many months of engines. Rosberg could not even finance a season.

 

Absurd? Well, Raikonnen was paid more than most not to drive in 2011. And if rumours are true, van der Garde was paid 15m this year not drive . . . 4 times as much as Bottas. That's crazy of course. Seems to me people can well afford this kind of stupidity, so what's the problem.

[Melbourne Park]

Great post wrcva.

 

Thinking about all that ... the tacticians at Mercedes should have gotten a substantial bonus for pulling in Hamilton last race at Monte Carlo. Their actions increased the focus on Mercedes and their two drivers around the most highly publicized GP of the year. What might have been just another Mercedes 1 & 2, became a media fest. And the ROI would have doubled from that race. 

Edited by Melbourne Park, 05 June 2015 - 01:36.

[JoyDiv]

This is supposed to be their net worth not a total of their F1 income.

 

I read an article about 5 years ago on how Irvine made millions and millions in Florida (U.S.A.) real estate. So good for him for making sound investments and not blowing his money.

 

ahhhh...that makes sense

[Rinehart]

I am not totally sure as each organization have their way of looking at various metrics in various dimensions but ROI calculations generally attempt at measuring some financial outcome as a consequence of the media "buy" on various channels (TV, Radio, Word of Mouth, online... so on) and/or other sales enhancement & customer retention activities.   Exposure (ad or logo or whatever other stimuli) can and will impact any of the levels in following funnels. 

(image credit: get2growth.com)

 

Objective being to push people into the funnel as deep as you can, sponsorships add a cross sectional emotional dimension to people's decision making (vs. traditional marketing campaigns that tell you to buy something because it is good).   ie. you might be totally indifferent (on the fence) about using Blackberry smartphone as far as it's features and performance, but as soon as you see your hero, say Hamilton, flash his BB during FIA press conference, you might go ahead and accept that implicit endorsement because that emotional connection alters your thinking resulting in you giving BB a try or if you were already using BB, you may not switch to Iphone or android for another year or if you were hating BB you may start not hating them as much...   Bottom line is your thinking and actions are altered positively for BB, simply because of your perception of Ham (your brain neutralizing negatives, and converting indifference into positive action), and that happening without you even seeing a particular BB ad but just seeing your "hero" using his "sponsored" smartphone.  Another example: There are 100s of thousands of people who are using Ferrari credit card (issued by Santander as a part of their sponsorship activity).  I would speculate that if you were to pull Ferrari out of that equation, maybe only 10% of those folks with Ferrari CC would have get that card because it is a Santander card.  That calculus would further change as you include drivers into the mix in different geo-demographic situations...  So, people's Ferrari emotions are enabling or activating and engaging positive perceptions of Santander goods and services whereby both are making loads of money in fees and finance charges.

 

I think that is the beauty of sponsorship that it makes the connection between your emotions and rational actions for the benefit of the product or service in question anywhere, anytime without being exposed to some silly TV ad that you may even skip...  Now, how do you measure this without extensive research as to what was the key reason for people's actions as you try to push and keep people into various stages of the funnel seen in the image?  

 

So, while traditional ad exposure (per click, per view so on) could be simpler to approximate based on unit cost and unit sales increase type of metrics, sponsorship ROI is more like sausage making.  As others have pointed out sometimes the executives involved do have motives for showing what a "great job" they are doing, but given the trends in sponsorships vs. traditional marketing, sponsorships must be working very well for most companies. Even if traditional ads feature sports heros they are not as effective because continuous "engagement" you have with cross branded sponsorship is not there or not as long lasting.   The analytics side is pretty complex as you have to do a lot of extrapolations based on models (which are based on many assumptions).  

 

I still think Max is wrong or just pushing his cost cap agenda which also is wrong.   This statement from Santander Advertising and Sponsorship exec is pretty telling how wrong; 

 

“In Formula One, we are sponsoring circuits, teams and drivers because the driver is an excellent asset to connect with the customer. The circuit is a message of supporting the country. The team is how we can manage the emotional assets around the sponsorship, but the driver allows us to connect with the customers and to develop commercial promotions.”  (x)

 

Great post.

As far as I understand it there is nothing wrong with the effectiveness of sponsorship in F1, the problem is just the sheer cost of it. 

[Ross Stonefeld]

I think the cost is a big problem because it massively limits the potentially pool of sponsors, but that there are so few Big Names also says something about the value/ROI/ability to track. And if you're spending that much you absolutely need to know if it is working.