Nike, arguably the biggest brand in sports, made headlines around the world in December 2015, after it signed NBA superstar LeBron James to an unprecedented lifetime endorsement deal. In a statement released by Nike at the time, the company said that the deal would provide “significant value to [its] business, brand and shareholders” and that it is confident that its LeBron business has the potential to “grow throughout his playing career and beyond”.

It might seem like a strangely timed deal, paying (reportedly) well over $500m for a player in the twilight of his sporting career, but James has proven that he is as valuable off the court as he is on it. Since his 2003 debut for the Cleveland Cavaliers, James has built up an impressive following of loyal fans. He boasts more than 27.7 million followers on Twitter alone, and to a big name brand like Nike this poses a golden opportunity for the company to sell a whole bunch of trainers. In fact, according to data provided by SportsScanInfo, Nike raked in more than $340m from the sale of James’ signature shoe line in 2014.

James’ deal with Nike may well be the first of its kind, in terms of its length and scope, but according to Evan Morgenstein, CEO of CelebExperts, this represents the peak of a dying breed, rather than a new trend for the world of celebrity endorsements.

Bad press
Eight years ago, before social media really took off, a standard endorsement deal with an athlete would include a number of traditional executions. The contract would likely require the celebrity to show their face at specific events, along with allowing the business to use their image and likeness for a new line of, for example, trainers – a very brick-and-mortar kind of deal. Nowadays, big name brands are not as likely to sign a celebrity for such an all-inclusive deal. Instead, the vast majority of the time, companies are looking to leverage celebrities’ social media assets for very specific purposes.

“[Social media] is where the marketplace has exploded”, explained Morgenstein. “I recently had two major corporations I was consulting for working on social media campaigns using NFL players during the week of the Super Bowl. A few years ago, they would have had to sign endorsement deals with every one of them. But today, for a fraction of the cost, they just buy their social media assets and use their accounts as a conduit to the consumer.”

Leveraging celebrities’ social media assets in this manner is a win-win situation. It not only reduces the end price for the business, it also limits the level of brand responsibility imposed on the celebrity – offering both parties a quick in-and-out arrangement.

“A shorter engagement doesn’t expose the company as much”, said Morgenstein. “Take any NFL star that is in the Super Bowl. If you are only buying their social media assets for that day and then you are done, the risk exposure is one in 365, rather than all year round.”

Big-name brands are incredibly risk-averse and it is because of this trait that social media endorsement has become so popular in recent years. After all, companies want to endorse celebrities whose own brand is similar to theirs. It is why Swarovski, a leading producer of luxury jewellery, chose the iconic Australian supermodel Miranda Kerr to be the face of its new campaign. It is also why the world’s most famous champagne house, Moët & Chandon, courted tennis superstar Roger Federer to become the international ambassador of the brand, and why fellow sporting legend Cristiano Ronaldo models Emporio Armani’s underwear and jeans. But, every time a business melds its brand image with that of a celebrity’s, especially for a prolonged period of time, the company is naturally worried about the damage its brand could suffer should something bad happen.

Back in 2005, the British supermodel Kate Moss discovered just how risk-averse the fashion industry can be when she made front-page news, after one of the biggest tabloid newspapers in the UK published a picture of her snorting cocaine. Within days, the fashion house Chanel, along with a number of other big names in the industry that had planned to run marketing campaigns with Moss, severed ties with the model, cancelling endorsements and generally distancing themselves from the scandal, fearing that it would tarnish their brand image.

Mercurial millennials
The brand protection that limited exposure provides businesses isn’t the only thing that is driving the new celebrity endorsement trend. Another reason why more and more corporations favour social media asset deals is because younger consumers simply don’t like being talked to by big corporations.

Back in 2005, the British supermodel Kate Moss discovered just how risk-averse the fashion industry can be when she made front-page news, after one of the biggest tabloid newspapers in the UK published a picture of her snorting cocaine

Ten years ago, marketing departments were focused on B2C. Big-name brands spent money on big campaigns with the hope of turning consumers into customers. But today, the marketplace is completely obsessed with the C2C business model.

“If you have somebody who reportedly is a fan of a product or brand talk to their fans about a particular product or brand, there is a much higher chance of acquiring them, especially among millennials”, noted Morgenstein. “Millennials are difficult to lock in because they are so mercurial. They don’t like being talked to by corporations. They don’t trust corporations. So, there’s no credibility or point in having a corporation deliver a message anymore.”

Less about likes
Acquiring a celebrity’s social media assets is simply safer, easier and far cheaper than traditional endorsement deals, which is why they have become so popular in recent years. However, businesses still need to think long and hard about what they are trying to achieve from their campaign in order to get the best results.

Small, emerging companies, for example, might be trying to build their brand, but still need to sell products. Larger corporations, on the other hand, are more likely to want to use endorsement deals to increase their market share. But no matter what a business is trying to achieve from a celebrity endorsement deal, it needs to remember that it is just another marketing tool in their toolkit. Too often, companies get blinded by the gaudy social media numbers and pie-in-the-sky sales pitches from marketing agencies.

“Agencies go to their clients and say, ‘we can get you in front of 50 million people’ and the brand manager goes ‘yippee’, but nobody looks at the fact that 75 percent of them are 15-year-old boys, when the product they’re selling is women’s wear”, said Morgenstein. “People lose control of their brains when looking at the numbers.”

The propensity for brand managers to get blinded by the numbers instead of focusing on how engaged consumers really are has been a real problem, but companies are gradually wising up and changing tack. Increasingly, advertising and marketing departments have stopped measuring the success of a social media campaign by the amount of likes it gets online.

“Likes are a lazy way to measure it”, said Morgenstein. “Get a hot girl to put a product in front of her and it doesn’t matter if the product is dog food – it will get likes. That still sells but, the truth is, it has to be more
than that.”