How Can Sports Organizations Value Assets In The Future

When investment banks, private equity firms, or venture capital firms evaluate companies

or assets to purchase, they primarily use three valuation approaches—inherent, relative, and

comparable valuations. Inherent valuations analyze the dollars or profits generated by a company

or asset to determine its overall value. Relative valuations analyze ratios to determine value. The

most common type of relative valuation is a price to earnings ratio—the price of a company

compared to its earnings. Comparable valuations examine the price of similar assets to determine

value—for example, what the prices of comparable companies are within an industry.

Sport organizations can employ a similar approach when determining values for sports

sponsorship inventory. This can start with an inherent valuation.

Inherent Valuation

For sponsorship inventory, companies analyze the number of impressions generated

rather than dollars. What are impressions? Impressions are the number of people who consume a

piece of sponsorship inventory. This usually means how many people can see sponsorship

inventory in one of the sponsorship categories. Let’s examine how impressions are measured in

each sponsorship category.

• Venue, Jersey, and Event: The most common measure is the number of fans that attend a

game or competition. Most sport organizations use the number of tickets sold as the

number of impressions generated. In addition, broadcast viewable signage is an important

factor in the calculation. The more a sign can be seen on television or digital streams the

more potential value it has for a corporate partner.

• Traditional Media: Television and radio ratings provided by Nielsen, Arbitron, and

Rentrak are the most common sources that are used to provide the number of people who

watch or listen to sports content. Daily circulation numbers are used for newspapers.

• Digital and Mobile Media: Organizations often use page views or the number of unique

visitors to count impressions. Page views count the number of total impressions

consumed while unique visitors only count distinct individuals. This means that if a

person returns to a page multiple times it only counts as one unique visit. One issue with

this approach is that page views do not always mean engagement. For example, a social

media post is not read by all people who like, follow, or subscribe to an account. Many

partners are now focusing on engagement (i.e., how many people consume content)

rather than solely examining page views or conversion rates.

The challenge with measuring impressions is that not all impressions are created equal.

More specifically, conventional wisdom is that the more impressions that are generated the

greater the value of the sponsorship inventory should be. Super Bowl television commercials

cost so much because over 110 million people watch the NFL’s championship game—the

highest rated television program of the year. The Super Bowl is also consumed live, unlike like

many other non-sports programs, which can have time-shifted viewing (i.e., watching a program

on a DVR) where viewers can fast forward through advertisements.

Are all 110+ million viewers of equal value to companies? Oftentimes, the answer is no.

For example, many companies are business-to-business enterprises rather than business-to-
consumer companies. That means these companies need to target specific decision makers that

make enterprise-wide decisions. For example, Oracle is a Fortune 500 company that primarily

sells enterprise resource planning, database software, cloud applications, and data center

operations service offerings. A significant portion of people watching the Super Bowl would not

be buying these products. Therefore, it is easy to make the case that spending money on the

Super Bowl is an inefficient use of Oracle’s marketing and advertising dollars. Instead, Oracle

could target channels that focus on that people that are more likely to make a purchasing decision

for their business for Oracle service offerings. Sponsorship impressions that target this

demographic should be more valuable to Oracle because they are more likely to be viewed by the

company’s customers.

The quality, and not just the quantity, of impressions is a critical concept for sport

organizations. More specifically, smaller sports teams or leagues do not need to generate

hundreds of thousands or millions of impressions to create value for sponsors. The sports=

organizations that can effectively communicate how they reach customer demographics to their

corporate partners will achieve sponsorship success.

Corporate Partners Go Loony For Minnesota United’s Sponsorship

Since InBev acquired Anheuser-Busch in 2013, the company has more closely examined

sports sponsorship. In particular, the newly combined company wanted to see where it was

getting value for its sports sponsorship dollar and reduce spending when it was not. Head of

Media Connections Lucas Herscovici articulated this strategy when he said, “It’s not about

signage, logos and doing defensive [property] deals. It’s about choosing the right partners and

the right passion points to drive the convergence of media, content and experiences” (Lefton,

Minnesota United (whose mascot is the Loon) clearly understood the company’s goals

when it began working with the sports sponsorship and analytics company Block Six Analytics

(B6A) to show AB-InBev how it was one of those right partners. The North American Soccer

League (NASL) team had an existing partnership with the alcoholic beverage company and felt it

was delivering value. However, it did not know how to calculate and communicate this value to

AB-InBev and risked losing its sponsorship without this capability.

Minnesota United accomplished these goals by using B6A’s Software as a Service (SaaS)

platform called the Partnership Scoreboard. First, Minnesota United used B6A’s Corporate Asset

Valuation Model to show how AB-InBev achieved its revenue and brand goals across different

channels with a single ROI metric. This includes showing every calculation in the model and

evaluating how each activation element delivers value based on the unique ways that AB-InBev

conducts business. Second, Minnesota United provided AB-InBev with access to the Partnership

Scoreboard’s dashboard that updates every time a sponsorship activation occurs. Rather than

waiting for the end of the season to see results, AB-InBev could log into the Partnership

Scoreboard and see updates in real-time.

The ROI outputs in the Partnership Scoreboard almost exactly matched AB-InBev's

internal calculations of the sponsorship’s value. Equally important was that Minnesota United

could communicate clearly by using a technology that presented the information in an easy,

digestible way to an important corporate partner. This provided the foundation for AB-InBev to

renew its sponsorship with Minnesota United because it knew that team valued its partnership in

ways that align with company’s brand and revenue goals.