GM dumps Facebook... for a soccer club?
The company hopes to extend its Chevy brand by sponsoring the world's most popular soccer team. But will shareholders pay the price?
General Motors (GM) has confirmed a five-year sponsorship deal between Chevrolet and soccer giant Manchester United in an effort to expand the Chevy brand worldwide.
This announcement comes in on the heels of GM's decision to pull its ads from Facebook (FB), as it did not get the desired results on the social network's advertising platform. As a result, GM has been looking for a more effective way to reach its audience.
Manchester United is one of the most successful soccer teams in England and, according to the latest studies, the most popular club in the world with the fan base of 659 million. Considering the enormous global audience and the several championships the club has won in the past 20 years, this sounds like an excellent deal for Chevrolet.
But is it a great deal for GM shareholders? Look at what happened to the stock prices of some of Manchester United's previous sponsors:
1. Vodafone Group (VOD)
The English mobile communications company was the Manchester United shirt sponsor between 2000 and 2006. The deal was signed near the peak of the technology bubble, and Vodafone's stock fell approximately 40% during the sponsorship. Manchester United, on the other hand, won two league titles and one FA Cup title in those six years.
2. American International Group (AIG)
The New York insurance giant signed a shirt sponsorship deal with Manchester United in 2006, right before the global financial crisis unfolded. By the end of the sponsorship deal in 2010, AIG's share price had fallen a whopping 96%. That failure didn't extend to the soccer field, however: Manchester United won three league titles and one UEFA Champions League trophy.
3. Aon (AON)
Aon became Manchester United's shirt sponsor in 2010 under a four-year contract. After the first two seasons, the insurance company's share price has appreciated by approximately 20%. Manchester United has won one league championship during this time period, so it seems to possible to be mutually successful. However, the company still has two years left in its sponsorship contract and the economical crisis in Europe might easily bring Aon's shares significantly lower.
Of course, the falling share prices were not caused by the Manchester United sponsorship. But the performances show that an advertising platform, no matter how popular, will not save the company from the merciless scrutiny of the market. From a shareholder perspective at least, General Motors might not be any better off by switching from Facebook to Manchester United.
Nevertheless, Manchester United's popularity in Asia could help Chevrolet boost its brand image in the region. The team has made a conscious effort to increase its popularity, especially in China, which is a key market for Chevrolet. Facebook is blocked in China, so a soccer club might prove to be a better way to reach potential Chevy buyers there.
GM was trading at $22.28 Thursday afternoon, down less than 1% from Wednesday's close, while Facebook was up 2% to $28.76.
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