"Why have Nike been tiptoeing around trail running?" Right - Nike stays interesting for many reasons. (Definitely watch "Air"on Amazon Video). The overarching answer is that for the world's largest sporting goods company (by far), everything is tiptoeing! A 40 million dollar investment would only be 1/10 of 1% of their budget. Trail Running to them is like me trying to find my missing sock in the morning. So I don't know; just providing some context. The one (ironic?) aspect I do know is that from small and scrappy to gargantuan, Nike has always been innovating. They do things.
If we do some basic back of of the envelope math, Nike should take home about $500M to $1.3bn per year from trail running (VERY rough, based on Nike’s 11% market share and the average annual expenditure of trail runners in the ITRA’s global survey, multiplied by that ‘20 million trail runners’ number that ITRA shared in their annual report in 2021) which would make 1-2.5% of their annual revenue - tiny!
Then we can take ‘demand generation’ as a % of revenue which this year sat at 7.9%, so let’s say thats $39M-$102M spent on marketing this year. That’s a hell of a lot and i would expect more visibility for that budget (considering the size of their competitors). What are your thoughts having been in the outdoor brand trenches yourself?
Very good numbers - I appreciate your research and data-based approach! I have no insider info at Nike, but here's another overarching observation that may provide context for our sport: The "bottom line" is indeed the bottom line. The purpose of most businesses is not to be cool, not to be seen as a "trail running brand", not to sponsor famous athletes, but to make money. If they're doing that they're fine; if not heads are going to roll. So us avid runners/observers get into big discussions on social media, arguing about who's cool and who's not, while the CEO's of these companies probably aren't even on social media and think it's stupid (but never would say that of course). So there's a gap between perceived value and actual value, between how we think the sport should go and the metrics that are actually driving where the sport will go. Interesting stuff - what's behind the curtain Dorothy? 😜
My thought exactly - I thought it was yogurt or something. And it's not just the unknown (to us; very popular in Europe) brand name; one can only purchase a Dacia in Europe, so they paid UTMB a lot of money for title sponsorship of a worldwide brand while only being able to monetize a third of that reach. Odd. But this is notable because while running brands spend a huge portion of their budget on sponsorships (relatively speaking, pro runners get paid a lot, not a little), as soon as you leave running and tap into mainstream business, the marketing spend suddenly becomes relatively minor. Tailwind isn't going to sponsor the Chicago Marathon anytime soon; Bank of America is. And I'm guessing this wasn't a strategic decision by UTMB but rather a benign company (no alcohol or tobacco) simply put money on the table. And something Matt has commented on, this deal was dependent on previous media deals. An RD can't even make a phone call to a car company if their race is being reported by a Twitter Feed.
Great point about monetising reach. This should be the turning point for UTMB’s sponsorship revenue (maybe even GTWS’) - once we start tapping into automotive, tech and finance (categories that love to have their brand on sports) the size of these deals should increase significantly!
Right - Apple Inc's budget would place it as the 5th largest <country> in the world. So I think the rough formula is: 1) Create an event that is fun to watch; 2) Engage a modern media company with the skill to make the event fun to watch for viewers at home; 3) With that audience, mainstream businesses might find it worthwhile to participate. Great example (for all kinds of reasons, good and bad): Tour de France. Courtney Dauwalter ran one of the best performances in history at the WS100/HR100 double, which I can still barely fathom, and during which I was actually watching the TdF.
About the marketing in trail running, another important aspect is the investment made by brands in elite athletes.
An example is Salomon. Salomon understood early that having athletes on the podium would build the brand reputation, and put in place different programs and teams to help them to perform.
Brands since then have understood this business model, and thanks to that more and more athletes signed deals with brands (and also have become professionals).
While Adidas did a great job in getting amazing athletes (Tom Evans, Peter Engdahl, Dani Moreno among others), Nike is still late on that regards, which could partly explain why their are not (yet) considered as a trail running brand as the others.
"Why have Nike been tiptoeing around trail running?" Right - Nike stays interesting for many reasons. (Definitely watch "Air"on Amazon Video). The overarching answer is that for the world's largest sporting goods company (by far), everything is tiptoeing! A 40 million dollar investment would only be 1/10 of 1% of their budget. Trail Running to them is like me trying to find my missing sock in the morning. So I don't know; just providing some context. The one (ironic?) aspect I do know is that from small and scrappy to gargantuan, Nike has always been innovating. They do things.
Completely agree, context is key here.
If we do some basic back of of the envelope math, Nike should take home about $500M to $1.3bn per year from trail running (VERY rough, based on Nike’s 11% market share and the average annual expenditure of trail runners in the ITRA’s global survey, multiplied by that ‘20 million trail runners’ number that ITRA shared in their annual report in 2021) which would make 1-2.5% of their annual revenue - tiny!
Then we can take ‘demand generation’ as a % of revenue which this year sat at 7.9%, so let’s say thats $39M-$102M spent on marketing this year. That’s a hell of a lot and i would expect more visibility for that budget (considering the size of their competitors). What are your thoughts having been in the outdoor brand trenches yourself?
Very good numbers - I appreciate your research and data-based approach! I have no insider info at Nike, but here's another overarching observation that may provide context for our sport: The "bottom line" is indeed the bottom line. The purpose of most businesses is not to be cool, not to be seen as a "trail running brand", not to sponsor famous athletes, but to make money. If they're doing that they're fine; if not heads are going to roll. So us avid runners/observers get into big discussions on social media, arguing about who's cool and who's not, while the CEO's of these companies probably aren't even on social media and think it's stupid (but never would say that of course). So there's a gap between perceived value and actual value, between how we think the sport should go and the metrics that are actually driving where the sport will go. Interesting stuff - what's behind the curtain Dorothy? 😜
I had never heard of Dacia the car company until reading this!
It’s a very European car, which gives a little insight to UTMB’s audience and commercial focus 🚗
My thought exactly - I thought it was yogurt or something. And it's not just the unknown (to us; very popular in Europe) brand name; one can only purchase a Dacia in Europe, so they paid UTMB a lot of money for title sponsorship of a worldwide brand while only being able to monetize a third of that reach. Odd. But this is notable because while running brands spend a huge portion of their budget on sponsorships (relatively speaking, pro runners get paid a lot, not a little), as soon as you leave running and tap into mainstream business, the marketing spend suddenly becomes relatively minor. Tailwind isn't going to sponsor the Chicago Marathon anytime soon; Bank of America is. And I'm guessing this wasn't a strategic decision by UTMB but rather a benign company (no alcohol or tobacco) simply put money on the table. And something Matt has commented on, this deal was dependent on previous media deals. An RD can't even make a phone call to a car company if their race is being reported by a Twitter Feed.
Great point about monetising reach. This should be the turning point for UTMB’s sponsorship revenue (maybe even GTWS’) - once we start tapping into automotive, tech and finance (categories that love to have their brand on sports) the size of these deals should increase significantly!
Right - Apple Inc's budget would place it as the 5th largest <country> in the world. So I think the rough formula is: 1) Create an event that is fun to watch; 2) Engage a modern media company with the skill to make the event fun to watch for viewers at home; 3) With that audience, mainstream businesses might find it worthwhile to participate. Great example (for all kinds of reasons, good and bad): Tour de France. Courtney Dauwalter ran one of the best performances in history at the WS100/HR100 double, which I can still barely fathom, and during which I was actually watching the TdF.
One reason I hope Nike stops putzing with trail running is so I can see their legendary ads, like this one: https://www.youtube.com/watch?v=kzXPcU2jJ4w
About the marketing in trail running, another important aspect is the investment made by brands in elite athletes.
An example is Salomon. Salomon understood early that having athletes on the podium would build the brand reputation, and put in place different programs and teams to help them to perform.
Brands since then have understood this business model, and thanks to that more and more athletes signed deals with brands (and also have become professionals).
While Adidas did a great job in getting amazing athletes (Tom Evans, Peter Engdahl, Dani Moreno among others), Nike is still late on that regards, which could partly explain why their are not (yet) considered as a trail running brand as the others.