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Insights

26 September 2017

The effect of social media on sponsorship

The utilisation of technology, and in particular social media, by brands to target consumers is not a new topic. What is new is the way in which brands are getting smarter and more innovative in how they use tech and data to target consumers in their sponsorship activation.

Where previously the rights offered by rights holders were linear, predictable and largely tangible in nature we are now fully immersed in the world of 'influencers', brandter (inter-brand banter) and measurable impressions. Advertising has become a two-way street. Rather than passively engaging with consumers through traditional methods like shirt sponsorship and product placement, brands need to be agile, dynamic and innovative.

Social media is now often regarded a separate category of rights which are paid for in addition to services and other rights offerings. For example, when using an athlete in ads, tweets by the athlete are often an 'add on' for an additional price rather than an assumed part of the deal.

The job of a modern day marketer is an evolving minefield. Negotiating fair terms for sponsorship which incorporate social media is complex. The following are some of the issues currently pre-occupying our clients.

Improved data = shorter term contracts?

A team's lucky striker will likely have more Instagram followers than the team itself and a make-up artist may have more followers than the make-up brand they swear by, but which will more effectively inspire customers to purchase your products or services?

Brands now have access to verifiable data clarifying the impact of their ads. Social media enables impressions and click-through purchases to be counted, used to inform real-time campaign optimisation and be referenced in annual reports.

Knowing your audience and understanding who that audience is listening to has always been key to a brand's strategy - while this remains the case this new verifiable data takes the guesswork out of the equation.

Brands have started demanding shorter term contracts enabling them to collate data and extend only the more successful sponsorship arrangements. One-off engagements relating to a specific campaign or event - or even a single tweet - are also increasingly common. In a world where an individual's popularity fluctuates as often as the wind changes, this trend seems likely to continue.

More flexibility, less control = greater impact

In traditional sponsorship arrangements brands have required approval rights over any content disseminated by any means. As the world becomes increasingly fast-paced and responsive, advertising must keep up. Requiring approval rights over every tweet or Instagram post could seriously reduce the impact of that post.

We are now seeing a more agile framework in sponsorship arrangements that allow for reactive posts and constant engagements rather than the traditional prescribed rights and obligations of each party. In this environment, due diligence on potential partners is more crucial than ever.

Striking a balance between maintaining the reactive appeal of social media and the protection of the brand is complex. One way for brands to manage this is to set out clear parameters in terms of what is acceptable without approval and what is an absolute no-go.

Staying on the right side of the regulator

Social Media sponsored advertising has been a hot topic for the advertising regulator in recent years. Consumers are also becoming more aware of the restrictions put on brands and will report those who fall foul of those obligations.

As a reminder, if an individual or entity has been paid (by money or otherwise) to post content on social media about a brand and the brand has any control whatsoever over the content of the post, it must be clear that the post is an ad.

The following tips should be contractual requirements and standard practices:

(a) Make the disclosure early. A consumer should know immediately they are looking at an ad. Including "#ad", "advertorial" or "ad feature" in a social media post or video title is a simple way to ensure this.

(b) Make the disclosure clear. Use of phrases like "in collaboration with", "with thanks to" and "sponsored by" should be avoided. Simpler terms like "ad" should be used instead.

Exclusivity – what about new technologies?

The extent of exclusivity will always be a hot topic for negotiation in a sponsorship arrangement. As new modes of advertising are created a new topic in the exclusivity discussion has emerged – to what extent will a brand have exclusivity over new technologies and platforms?

Clarity in the contract is essential. Stating that a brand has exclusivity in social media will be insufficient if the latest platform is not classed as social media. Increasingly we are seeing rights of first refusal in sponsorship arrangements that cover new technologies. Whether or not this right will involve additional sponsorship fees is open for debate but this allows both parties a degree of flexibility which is a necessity in this ever-changing landscape.

Reputation management – can your social media history every truly be erased?

Incorporating morality and reputation clauses in sponsorship contracts is nothing new but many brands are becoming increasingly concerned about engaging individuals to promote their brand on social media. The reactive nature of social media means that brands often have less control over content (see above) but, in addition, terminating a sponsorship deal doesn't necessarily give brands the instant separation that they are looking for.

Historic social media posts will exist until they are deleted. Including a 'cleansing' clause in your sponsorship deal which can be activated if the arrangement is terminated for certain reasons might give some comfort here.

Social Media has transformed the sponsorship scene. Contracts for a single Tweet from a pre-eminent individual are heavily negotiated. Where rights and obligations have previously been meticulously described and the parameters clearly set out, we are moving to a contractual standard that is agile, responsive and principles based. Brands are increasingly giving up control – something that the boardroom will undoubtedly struggle with. But it's worth it – one Tweet is worth 1000 branded shirts.


This article was written by Caroline Swain. For more information, please contact Caroline on +44 (0)20 7203 5158 or at caroline.swain@crsblaw.com.

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