Can technology democratize the celebrity endorsement market?
By Paul Keegan, contributor
When my wife, Tatiana Keegan, recently decided to go back to professional competitive ballroom dancing after a six-year absence, I wasn’t so much worried about her new partner, a dashing Austrian fellow named Werner Figar with zero body fat and dazzling Latin moves. No, I am a modern man: I was worried about money. As with most minor sports, the economics of ballroom dancing are weighted heavily against athletes (and their long-suffering spouses). There are travel costs, entry fees, equipment, and outfits (in our case, rhinestone-studded dresses) that can easily cost tens of thousands of dollars a year -- all in pursuit of meager prize money.
So I began researching the world of sports endorsements, hoping to land a deal that would keep us out of the poorhouse. The landscape isn’t pretty there either. Of the $1.1 billion advertisers pay athletes to hawk cars, burgers, and erectile-dysfunction pills every year, two-thirds of that money goes to just 75 A-list megastars, such as LeBron James, Derek Jeter, and Peyton Manning, according to SportsBusiness Journal. That leaves thousands of major league players worshipped by their fans -- even relatively big names like Jorge Posada of the New York Yankees or Rajon Rondo of the Boston Celtics -- scrambling for that last third of the pie. And if you play a minor sport (the average Women’s Professional Soccer player, for example, earns just $32,000 a year), well, don’t even think about quitting your day job.
Then I started hearing about technology that may finally level the playing field. A startup in Irvine, Calif., called Brand Affinity Technologies (BAT) has signed 3,600 pro athletes to its roster -- mostly from football, baseball, basketball, and hockey, and including Posada, Rondo, and even Drew Brees, before he was a Super Bowl hero -- and is now expanding into pop music. BAT just signed a deal with RCA/Jive to put artists such as Alicia Keys and Kings of Leon on its platform, and plans to go after television and movie stars next.
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These second-tier (and lower) celebrities are attracted to BAT’s simple premise: Sign a contract, sit for a series of photos and videos featuring stock poses, and wait for the endorsement dollars to (hopefully) come rolling in. On the other side of the equation, advertisers large and small log onto BAT’s database to scan the photos, bios, and popularity rankings to find just the right pitchman or -woman. The advertiser can download the images, instantly create ads for the Internet, television, print, or billboards, and pay an endorsement fee ranging from $4,000 for a retired star (for a 30-day online spot) to $50,000 for a current player in a longer campaign across multiple media platforms. BAT can even help the advertiser find and buy space in any media platform.
So I was delighted when BAT called after I’d filled out an online form on the company’s website on Tatiana’s behalf. (The rep who responded, Chad Payne, didn’t know I was a Fortune contributor, so he wasn’t simply seeking free publicity.) Impressed by her résumé, he wanted to sign her up immediately. “Any advertiser wanting to be associated with ballroom dancers can use her because she’s already on the platform, ready to go,” he said. But how can BAT possibly make money from the small sums a company would spend on ad campaigns featuring a ballroom dancer? The company says it’s all about the technology: Once the athlete is in the database, the system is completely automated, and it costs BAT the same amount to act as a matchmaker for a small media buy as it would for a million-dollar campaign. The contracts are all standard, so there is no negotiating -- the athlete (or agent) gets an e-mail offer and has 96 hours to say yes or no.
While it normally can take advertisers months to find the right athlete, negotiate a contract, arrange the shoot, and create an ad using offline tactics, BAT’s technology allows the whole process to happen in a matter of weeks, even days. When Ford needed a spokesman for its dealerships in the Rocky Mountain area last year, it found Ian Stewart of the Colorado Rockies and put up an online ad in four days, just in time for the baseball playoffs.
It’s efficient, too, for the athletes, who attend a single 20- to 35-minute photo and video session at which they mug for the camera in a series of stock poses. After Tatiana and Werner signed on with BAT (talent doesn’t pay a fee to become part of the database), they arrived at their photo shoot in April in full ballroom regalia, dancing the cha-cha and pushing each other off the set like a screwball-comedy couple. At the same shoot, New York Giant’s wide receiver Hakeem Nicks coolly walked in front of a green screen in baggy jeans and a muscle T-shirt, and pointed in various directions: left and right, up and down. Later a photo of a car, say, can be superimposed on the background to make it look as though the athlete is pointing directly at the vehicle.
The final product is unquestionably cheesy (no one is going to mistake the production values on these ads for a Spike Jonze-directed commercial), but it is a fast and easy way for performers and athletes to cash in on their fame while it lasts. And it apparently works: McDonald’s (mcd) used Yankees catcher Posada’s image in an online display advertisement for its $1.49 Mac Snack Wrap. It took less than five weeks to find Posada and produce the ad, which ran for 90 days on sites such as nypost.com and Yankees.com. BAT says the average click rate for the Posada ad was twice as high as the same ad without the baseball player.
BAT is the brainchild of 36-year-old CEO Ryan Steelberg. Steelberg says this is the fifth advertising technology company he has started with his brother Chad Steelberg, who is BAT’s chief technology officer. Their last company, dMarc Broadcasting, a developer of ad software for radio stations, was sold to Google (goog) in 2006 for $400 million, and the following year the brothers started BAT, providing most of the $12.5 million in startup capital themselves. Steelberg expects revenues to double this year to about $30 million over 2009 and says the company will be profitable by early next year. “I could see that there were gaping holes in the ecosystem of celebrity endorsements,” he says.
Steelberg says the Tiger Woods scandal did not dampen the appeal of celebrity endorsements but rather exposed how risky the current way of doing business is. The real lesson of the Woods debacle, he says, is that companies should not attach themselves to a single star for a long period but stay flexible. One solution is to spread the risk among many celebrities, as when Sony recently used BAT to sign ten Major League Baseball players to market its new PlayStation baseball game, a complex deal that came together in less than two weeks.
Allowing advertisers to move with lightning speed has vast implications for the advertising business. Call it the Disposable Celebrity: A brand can quickly dump a baseball star who tests positive for steroids, goes 0 for 50, or is revealed to have, say, a thing for sheep. It can also quickly attach itself to a rookie who hits four home runs in a game or pitches a perfect game.
Companies can run shorter campaigns rather than commit to long-term contracts like Accenture’s hugely embarrassing association with a certain golfer (“Go ahead, be a tiger”). BAT also makes it simple to find the right local hero for a specific geographic area -- like Ford’s (F) deal with Packers running back Ryan Grant for a campaign in the Green Bay area -- and affordable enough for even Joe’s Pizza to bask in the reflected glow of celebrity.
It costs nothing for advertisers to log onto BAT’s system and go shopping. If an offer to the talent is accepted, the company pays BAT a certain percentage above the cost of the ad campaign. About 30% of BAT’s revenue comes from this licensing and clearance process and offers by far the greatest profit margin because the system is fully automated (the company has only 41 employees). The remainder of its revenue comes from the harder, lowermargin work of a traditional advertising firm: creating the ads, planning the campaign, and buying media if the advertiser doesn’t want to use outside agencies. BAT can also set up custom television shoots and in-person appearances that can net the bigger stars up to $250,000 in endorsement fees.
Because BAT’s biggest profit potential lies in the automated matchmaking process -- and because endorsement fees are often low -- Steelberg is shooting for high volume to drive revenue. That’s why the company has eagerly signed up not only major-sport stars like Posada also but ballroom dancers, Brazilian jiu-jitsu world champion Penny Thomas, champion softball pitcher Jennie Finch, and soon B-list, C-list, and D-list music, TV, and film stars (if there are any E-list celebrities out there, BAT wants you too).
Not surprisingly, BAT’s technological approach is not looked upon kindly by its human competitors. “One of the myths I hear a lot is that celebrities are inaccessible,” says Kristi McCormick of Matchbook Co. in New York, a small firm that helps clients such as Starwood Hotels and L’Oreal decide which celebrities to hire. “There’s so much talent out there that you don’t need BAT to find them. Just do a Google search -- everybody’s on Twitter and Facebook now.”
Noreen Jenney Laffey of the Celebrity Endorsement Network in Calabasas, Calif., says that finding just the right star for a brand is a sophisticated art that can’t be done by a computer. “This seems like a cookie-cutter way to do it,” she says of BAT. “Maybe it’s good for quick down-and-dirty stuff, but how well do they know the talent? I made a deal years ago with [San Diego Padre Hall of Famer] Tony Gwynn for Denny’s because I found out that he had met his wife at a Denny’s. There’s definitely a benefit to the personal touch.”
Steelberg says he agrees that the human element is important, but argues that technology allows him to bring celebrities to many more small-dollar clients than small firms like Laffey’s possibly could -- and gives advertisers far more flexibility. “We’re not trying to dehumanize the process. We’re trying to improve it,” he says. “It’s like technology on the stock market that lets you be a day trader or be like Warren Buffett and buy and hold. You can have a short relationship with the celebrity or a long one. I provide the tools that let you do both.”
A bigger problem could be that if Steelberg is successful, his technology could help devalue the entire concept of the celebrity endorsement. (He could also spawn competitors: There are a lot of sophisticated technologists who understand ad networks and analytics software.) BAT is the natural outgrowth of our networked age in which anyone can become a YouTube or reality-TV superstar and the “personal branding” movement has turned otherwise decent citizens into zealous self-promoters obsessed with their blogs, websites, and tweets while trying to manipulate Google to get noticed. The easier it gets to become famous, the less impact it will have to book a celebrity to endorse your product.
So while BAT would certainly welcome “celebutantes” such as Paris Hilton and folks like Kim Kardashian who are famous for, well, being famous, I’d humbly (and admittedly self-servingly) submit that advertisers should scour the BAT database for talent and accomplishment instead. Consumers are discriminating enough to judge brands hawked by reality-show contestants differently from those promoted by highly trained and disciplined performers such as Penny Thomas, Jennie Finch, and a certain ballroom dancer I know. No marketer has hired Tatiana -- yet -- but beyond the financial rewards, it would be heartening to know that in our digital, fame-obsessed world, hard work and skill can still sell toothpaste.