NFL Tarps Highlight Problems With Logo Exposure Value Metrics

BY ADAM GROSSMAN

Both NFL teams and their partners will not like seeing the headline “Sponsors of NFL teams are not happy with the lack of airtime for their tarp ads” in last Friday’s Sports Business Daily Newsletter by Ben Fischer and Terry Lefton. The larger issue, however, arguably is the way that tarps’ values are being calculated and communicated to all stakeholders in the first place.

We discussed the NFL tarps in a previous post about how we expected tarps to be a valuable sponsorship. In particular, we mostly agreed with San Francisco 49ers CRO Brent Schoeb who stated, “large viewership of NFL games makes up for the less time on camera.”

However, large viewership creates value when logos can be seen during games. Fischer and Lefton do an excellent job of talking to industry experts and describing the issues behind why tarps have been difficult to view in NFL broadcasts. These include partner branded (versus league or team branded) tarps’ locations in stadiums, the seats that tarps cover create logo placements that angle away from the field of play, and media partners understandably not wanting to show empty stadiums in broadcasts (fans typically do not like seeing empty venues).

Even with these valid criticisms, however, the lack of airtime and value created by these assets may not be the tarps’ most pressing problems. According to “a preliminary study of two Week 1 games conducted by an agency representing NFL teams, the media value generated by the signs averaged about a 2x return on investment, less than half the 4-5x projection developed by their analysis of footage from prior years’ broadcasts.”

This analysis shows one of the fundamental challenges when it comes to tarp signage specifically and logo activations more generally. Using the agency’s metrics, teams are generating significant return on investment (ROI) expectations for an expensive, highly visible asset. Yet, the “only” 2x ROI (rather than 4-5x projected ROI) is a disappointment.

How did generating a positive ROI become a problem? Many logo exposure analyses focus on quantity (how many people saw an activation) and engagement (how likely someone interacted with an activation) metrics. The most commonly used quantity metric is a cost per thousand impressions (CPM). While NFL year-over-year ratings are possibly down slightly, the opening games are still delivering many of the largest television audiences (i.e., impressions) in 2020.

The “original sin” is the cost part of the CPMs for logo exposure. The base rate cost is usually the same or similar to the market rate for a television commercial. However, virtually everyone in the industry agrees that logo exposures like the tarps are not the same as television commercials.

To account for this difference, the base rate CPM is most frequently “discounted” based on a variety of different engagement factors. This is where duration (how long it is on screen) impacts value in addition to prevalence (how big a logo appears on screen), centricity (how close it is to the center of the screen), and confidence (how clear it is on screen).

While these engagement factors are critical to consider, the challenge has been that these “discounts” are typically not strong enough to avoid value inflation. For example, a logo that is on screen for a long period of time adds value by (in large part) reducing the duration “discount” on the base CPM rate.

Even with their duration issues, however, the tarps still generated 2x more value than their cost according to the agency’s calculations. This creates a problem when logo assets like tarps are being sold and bought. It does not make economic sense for teams to price logo exposure assets like tarps at 2x below their ROI, let alone the 4-5x ROI that was originally projected. The teams would be sacrificing hundreds of thousands of dollars if these were fair market asset valuations.

Yet, teams are willing to sell assets at these steep “reductions” because companies have “learned” to expect a 4-5x type ROI is necessary to achieve a break-even result or create their own version of a “discount” value formula. If companies do not achieve or exceed these seemingly high-level expectations then an investment is often considered to have delivered negative value even though it generated a positive ROI. 

There are two primary ways the Block Six Analytics (B6A) Media Analysis Platform (MAP) addresses these problems. The first is that we start our logo exposure valuation process with base rates more similar to out-of-home (OOH) signage and not television commercials. This lower starting point enables us to not be in position to have to “discount” our base CPM rates in ways that can cause value inflation in the first place. For example, longer logo exposure durations do directly translate into an increase in value in MAP rather than reducing the “discount” using other approaches.

The second is that we account for quality considerations in logo exposure analysis in addition to quantity and engagement. Quality means what is the fit of the audience and activations to a company’s revenue and brand goals. For example, a logo exposure asset is typically a good fit for companies looking to maximize brand awareness for their business as whole, a new product launch, or reaching new audiences.

These solutions allow B6A to determine whether logo activations are adding (or not adding) value for a business based on a company’s specific goals. This enables our clients to have the confidence that a positive valuation using our metrics means they have generated a positive ROI for logo exposure assets rather than trying to determine a discount on ROI. By continuing to use higher base rates and not factoring in company-specific metrics in valuations, many partnership buyers and sellers will have difficulty really understanding the fair market value generated by assets like the NFL tarps.