Backers aim to benefit from grand prix racing's worldwide reach and crowd-pleasing image to promote their brands.
Sponsors make the cars go around
There is a certain irony to the fact that the world's most expensive advertising space, when performing its intended function, travels far too fast for the naked eye to see. But the sponsors who shell out tens of millions of dollars to place a few centimetres of their company's logo near the collarbone of a Formula One driver know it is not the naked eyeballs that count.
It is the estimated 600 million sets of eyes watching on their television screens over the season - the third-largest sporting audience in the world - that makes their investment worthwhile and powers Formula One alongside the most lucrative sports in the world. Although F1 attracts fewer viewers than the Olympics and the Football World Cup, its frequency, as well as its geographical reach across continents in an increasingly globalised world, makes sponsorship in the sport one of the most coveted prizes for companies looking to boost their brands.
"It gives high visibility," says Riccardo Tafa, the managing director of RTR Sports Marketing Agency, a company based in Bologna that works with F1 sponsors. "The values of the sport are really good. "It's high technology, it's thrilling, it's show business, basically. It's a sport, but it's entertainment as well. "Plus, there's the dream of certain locations, such as Monte Carlo, and the history of the old tracks. So it's a good mix, and companies can really benefit from being linked to this."
F1's reach is another draw, he says. "It's brand awareness in more than 200 countries. The audience is fantastic, plus the frequency of the race is so high that there's a big advantage if you compare it to the Olympics or the football World Cup." Mr Tafa's line of work is about helping brands squeeze value out of their F1 sponsorships beyond just the airtime caught during race coverage. Companies, of course, will pay dearly for the privilege. Top teams such as Ferrari charge between US$15 million (Dh55m) and $50m for title sponsorships, and between $3m and $15m for co-sponsorship. Trade link-ups can run from $1m to $3m. F1 teams get between 80 and 85 per cent of their income from sponsorship.
"Apart from that, you have to think about the hospitality that you can run linked to sponsorship programmes and then the promotional activities linked to consumers linked to the image of F1," Mr Tafa says. "The branding of the car and the driver is just the tip of the iceberg." One of the companies likely to benefit most from being linked to Sunday's Abu Dhabi Grand Prix is Etihad Airways. The airline signed a seven-figure, three-year sponsorship deal to see the race named the Formula One Eithad Airways Abu Dhabi Grand Prix.
From the beginning, Etihad looked at its F1 sponsorship as more than a way to just promote its brand; it wanted to use it to promote Abu Dhabi itself. "F1 is a great story and a great opportunity which somehow comes at the right time, in the sense that there has been a lot of negativity about travel and recession, and here comes this super event for Abu Dhabi," says Peter Baumgartner, the chief commercial officer of Etihad Airways.
"It will bring not just incremental revenue traffic, but it is a big story about the position of Abu Dhabi, and it will give Abu Dhabi almost overnight fame, which is a strong position to come out of recession. That was the kind of event we were waiting for and looking forward to for a long time." To raise awareness of the race, it painted one of its A320 aeroplanes in the livery of a racing car; black with the image of a red F1 car together with the official race logo on the rear and on the engines. It also received a major trackside advertising package and podium branding for the race. The airline also is offering customers a series of all-inclusive packages that include flights, accommodation and grand prix tickets.
After becoming a race sponsor, Etihad strengthened its ties to F1 even further last year by signing a three-year deal with the Ferrari F1 team. The airline's name is emblazoned on the back wing and side of Ferrari's distinctive red cars, as well as on the jackets and helmets of drivers Kimi Raikkonen and Felipe Massa, who will miss Sunday's race after suffering head injuries in a freak accident while qualifying for the Hungarian Grand Prix in July.
Ferrari is also sponsored by Mubadala Development, the strategic investment arm of the Abu Dhabi Government, with the company holding a 5 per cent stake in the team. The first Ferrari theme park is also planned for Abu Dhabi. Mr Baumgartner points to the airline's various sponsorship activities with Ferrari as examples of creative use of their association with the team, beyond logo airtime on race day. Last autumn, the company brought Raikkonen to Abu Dhabi for the opening of Etihad Holidays newest outlet in Abu Dhabi's Marina Mall. As well as performing a ribbon-cutting ceremony, the Ferrari star signed autographs and posed for photos with customers.
The company also uses its association with Ferrari to entertain clients in its various markets around the world. John Adams, the managing director of BSL World, a sports marketing company based in London that is providing some logistical support to Abu Dhabi Motorsports Management for the grand prix, says such a variety of possibilities in sponsorships means they are not limited only to seven-figure deals.
"There is a place in every sponsorship deal for somebody," he says. "The most important thing for a client to understand is what they are trying to get out of it. "People do sponsorships for different reasons. Sometimes they are passionate reasons and sometimes they are business reasons." Because of this, he says, there are few limits on who can become a sponsor. "If you look at the sponsors on all the cars, you will see that there is everything from electronics to clothing to financial organisations," Mr Adams says. "Of course, in the past there was cigarettes and alcohol, and we've gone through different eras. They come and go."
Perhaps no story of sports sponsorship has been as tumultuous as that between F1 and the tobacco industry. Cigarette companies were the first commercial sponsors of grand prix racing, beginning at the Monaco GP of 1968, when Team Lotus drivers Graham Hill and F1 rookie Jackie Oliver ran in Gold Leaf-sponsored cars. Philip Morris entered the market in 1972 with its Marlboro brand, and in the following years, Gitanes, Camel, Rothmans, Mild Seven and Benson&Hedges all became major players.
But in 1976, as the health risks of smoking were starting to become more widely known, Germany began banning tobacco sponsorships at motor races. The UK followed in 1984 and France in 1992. As anti-smoking legislation tightened its grip on the tobacco industry around the world, F1 sponsorships remained one of the few places where the brands could promote themselves, thanks in large part to the formidable negotiating skills of Bernie Ecclestone and the rest of the F1 leadership.
Today, fans will no longer see cigarette logos during the race coverage. In the past year, those troubles with tobacco sponsors were eclipsed by the problems from the financial crisis, as many of F1's biggest sponsors were financial institutions. In February, ING, the Dutch bank and insurance company, announced it was pulling out of its sponsorship with Renault at the end of the season as part of cost-cutting forced by multibillion-euro losses. ING's total budget for F1 was about $100m.
That followed the departure of Honda earlier this year and the Credit Suisse Group's decision to end a sponsorship deal with BMW Sauber. ING's departure from F1 was hastened last month, when both of Renault's title sponsors pulled the plug over a race-fixing scandal. Although Renault received only a two-year suspended ban for their involvement in a deliberate crash in Singapore last year, while Flavio Briatore, the former principal, took the brunt of the punishment with a lifetime ban, both companies felt the damage to their reputation was sufficient to end their sponsorships immediately.
And therein lies the downside of the intense association with teams and drivers who are, after all, only human. That was enough to convince Mr Tafa, after years of focusing on F1, to shift his focus to motor GP. The race-fixing scandal has hurt the brand, he believes. "I think that the last year hasn't been the best for the image of F1," he said. "But these are just little problems for Formula One. It's still the pinnacle of motor racing, and a fantastic sport for a sponsor."