- Alibaba reportedly beat Amazon to the deal
- Partnership to bring cloud computing and e-commerce services to IOC
- Alibaba will have to tread carefully in Pyeongchang owing to tensions between China and South Korea
In January the International Olympic Committee (IOC) unveiled a groundbreaking partnership with Chinese e-commerce platform Alibaba that will run through until the 2028 summer Olympic Games. The deal, reported to be worth about $800m (€742m) to the IOC, will cover six Olympiads, of which the next three will be held in Asia – in South Korea, Japan and China.
Alibaba is not the first Chinese company to serve as a commercial partner of the Olympics. Lenovo was an IOC partner during the 2004 to 2008 cycle of events. which culminated with the Beijing Games. However, the scale of the Alibaba deal undoubtedly signifies China’s coming of age as a commercial force in elite sport. As the IOC’s official ‘cloud services’ and ‘e-commerce platform services’ partner, the company will be embedded at every level of the IOC’s infrastructure during a period of profound digital upheaval.
Announcing the deal at the World Economic Forum in Davos, Alibaba founder and executive chairman Jack Ma spoke of his company’s “shared values and common vision” with the IOC. IOC president Thomas Bach added: “In this new digital world, Alibaba is uniquely positioned to help the IOC achieve a variety of key objectives outlined in Olympic Agenda 2020, while positively shaping the future of the Olympic Movement.”
PICTURE: The IOC’s Thomas Bach
Both sides talked about the importance of getting young people more active with Bach articulating the IOC’s ambition to get “couch potatoes off the couch”. Ma, who is believed to have beaten Amazon to the deal, spoke of the importance of “teamwork”, “globalisation” and “fair competition” – buzzwords that could also be coded observations about the political divide between the US and China over protectionism.
The deal covers a lot of ground, but looking at it from a headline strategic perspective, it is a good fit, says Rick Burton, a former US Olympic Committee chief marketing officer who is now a professor of sports management at Syracuse University in New York. “Alibaba paid a premium, but the deal makes sense because it wants to be a global player alongside the likes of Amazon, Google and Facebook,” he says. “The power of the IOC is that it gives your brand immediate credibility.”
From the IOC perspective the deal is “financially very good,” says Burton, “but it also sends out a strong geopolitical message. With five Asian TOP sponsors (Panasonic, Toyota, Samsung, Bridgestone and Alibaba) and the next three events being hosted in the region, the IOC can’t really be criticised anymore for being too weighted towards the West.”
In terms of the nitty gritty of the deal, the two sides have identified three main areas of activity. Firstly, the use of cloud computing infrastructure and services “to help the Olympic Games operate more efficiently, effectively and securely, including supporting big data analytics”. Secondly, the creation of “a global e-commerce platform for Olympic stakeholders to engage and connect with fans seeking official Olympic-licensed products manufactured by the Olympic parties’ official licensees, and selected sports products, on a worldwide basis.” And, finally, the use of Alibaba’s digital know-how to “develop and customise the Olympic Channel for a Chinese audience.”
Michael Payne, a former IOC marketing director who now acts as a consultant to brands and rights-holders, was directly involved in the year-long negotiations that brought Alibaba and the IOC together. Working alongside him was Shankai, the Chinese sports agency that helped to bring Chinese brand Hisense into the family of Uefa, football’s European governing body, for Euro 2016. “As the meetings progressed it became clear there was a very interesting play to be made in the fast-moving worlds of cloud technology and e-commerce,” Payne says. “It’s not hype to say that this deal represents a level of strategic partnership that has not been seen before. It goes way beyond the typical TOP partnership.”
For those who question Alibaba’s credentials to deliver in these key areas, Payne points to the company’s track record in China “where it has played a key role in driving the Chinese economy by empowering small companies and retailers.” He adds: “To me, the situation feels similar to 1996 when we brought in Korea’s Samsung. They were a challenger that grew to be one of the most innovative brands in the world. Sometimes, it’s the newer sponsors that change and innovative the most – like 3M and Visa – because they have fewer preconceived ideas.”
Even so, 12 years seems like a long time to hand over such key areas of service provision. However, Payne counters that by saying: “Longer term relationships are important because the Olympics works on an eight-year planning cycle. Reinventing areas like e-commerce every four years wouldn’t be that effective. We’ve seen a similar situation with broadcasting where long-term deals with companies like NBC work well.”
Looking at the specific elements of the deal, there is not much to say yet at this stage about how Alibaba’s expertise will impact on the operational side of activities. But there are a couple of positive points worth making. Firstly, Alibaba’s long-term involvement will help the IOC in terms of Games-to-Games knowledge transfer – an area that has long been perceived as a weakness. Secondly, the emphasis on efficiency comes at a time when the issue of cost has moved up the IOC’s agenda. With Tokyo’s authorities anxious about the ballooning price of the 2020 Games, cost control is central to the IOC’s political message.
There is one potential challenge, however, which is that Alibaba and the IOC will need to tread carefully in the run-up to next winter’s Games in the Korean city of Pyeongchang. With political tensions between China and South Korea high, Alibaba will need to ensure it does not get in the way of the serious operational investments already made by local firms. This point was acknowledged in the Davos press conference announcing the deal, with IOC television and marketing services managing director Timo Lumme saying: “We will immediately start implementing and working on efficiency, security and ecommerce – bringing as many benefits as we can to Korea. But a lot has been invested in Korea, so we’ll offer not impose.”
PICTURE: The IOC’s Timo Lumme
The proposed e-commerce platform is another area where the two sides need to add some detail. Speaking in Davos, Bach said “all our stakeholders, including the 206 National Olympic Committees, will be able to engage and connect better with all fans looking for Olympic licensed products.” Lumme added a specific example, saying: “The vision here is to build a truly global programme, so if you’re sitting in San Francisco and you want to buy Team USA apparel, you will use Alibaba.”
Alibaba, which currently has 500 million users a day (mostly in China) has certainly done some interesting work in this area, driving e-commerce revenues through the use of social media. But there are still a number of practical questions to be answered, for example about how revenues will be split between Alibaba and the IOC.
Likewise, Bach and Lumme did not refer specifically to sponsors as stakeholders, so it is not clear to what extent and under what terms partners will be able to deploy product. Nor is it clear what the status of third party e-commerce platforms like Amazon and eBay will be when it comes to selling Olympic-related products and services. At London 2012, best-selling ranges (outside Team GB kit) included mascot toys, three-pin badges, a Routemaster bus model, a London 2012 coin collection, Union flag wristbands, and the Royal Mail’s gold medal stamps. So it’s not clear if this kind of product would appear on the new dedicated platform.
Payne says it is early days but argues that “the potential of this new sports hub goes way beyond souvenirs. It was always one of my regrets while at the IOC that we weren’t able to make more progress in growing the licensing side of the business.”
PICTURE: Alibaba’s Jack Ma
One specific issue that did come up during the Davos press conference were the problems Alibaba has had in controlling counterfeit product. On this subject, Ma said he had 2,000 people working to tackle the issue: “Anything that happens in the real world happens in the virtual world. We’ve been fighting human greed since the day we set up but we can’t finish it alone. We are dealing with 12 million small business and 1.2 billion products on our site… 500 million buyers every day. It is difficult to clean all the dirty things in one night.”
The extent of Alibaba’s support for the Olympic Channel is also one that is yet to be clarified fully. Launched after Rio 2016, the channel is the IOC’s attempt to turn the Olympics into an always-on brand with content available 365 days a year across any platform. Initially offered in English, the IOC said at launch that it would “foster partnerships with other Olympic stakeholders, including rights-holding broadcasters and National Olympic Committees to develop localised versions of the Olympic Channel.” Alibaba, then, will play a part in creating a tailored service for the Chinese market – though it is not clear yet whether Chinese public broadcaster CCTV – the IOC’s TV rights-holder in China through until 2024, will also be involved.
In terms of Alibaba’s rationale for supporting the channel’s localisation, Payne says the IOC deal is not just about Alibaba’s expansion on the global stage, but also about “reinforcing its leadership position in e-commerce in its own market.”
In global terms, Alibaba has set itself a target of reaching two billion consumers by 2020. Echoing Burton and Payne, Octagon president, marketing international, Jeff Ehrenkranz believes the company has probably chosen the right partner to do this – though he stresses that the Olympics “isn’t an instant path to success. You only really know whether deals like this work once you’ve evaluated the brand’s return against objectives.”
To truly achieve value from the deal, Ehrenkranz identifies two key challenges for Alibaba. “The first is that they have to tap into the audience’s passion for the Olympics every day of the year – not just during the event,” he says. “They have to integrate it into everything they do in a creative and authentic way.”
The second is that they have to sweat their assets at every level of the Olympic family. “The thing that the Olympics gives TOP partners is a relationship with every one of the national teams involved with the games. The challenge and opportunity is making the partnership work across all your key markets.”
Like Payne, Ehrenkranz sees the wisdom of having a tech partner involved for an extended period of time. “What I’m hoping we’ll see is that this partnership won’t just be about Alibaba’s relationship with consumers, but the mission critical role it has on the b2b side of the Olympic Movement,” he says.
If there is one other area to watch, says Ehrenkranz, it’s the relationship between the IOC and local organising committees, “in terms of what the latter are able to sell.” He adds: “If you look back at the IOC’s deal with Toyota last year, for example, that’s a category that used to be sold by local organising committees. So, with Alibaba, which covers a number of activities, we’ll need to see how that affects sponsorship sales at a national level.”
In terms of the IOC’s position, one obvious question is whether the signing of Alibaba will help the IOC to put a difficult 2016 behind it, when many of the headlines concerned doping and the challenging preparations for Rio 2016. Ehrenkranz, however, says there is a risk of exaggerating the impact of such issues on the Olympic brand. “People are interested in the amazing things the athletes do, not the problems that face the governing body,” he says. “As long as fans keep connecting with the athlete stories, the Olympic brand will remain healthy.”
The deal also has ramifications for the wider sports marketing community. For a start, Burton believes it will raise the bar for other IOC sponsors. “The IOC will probably point to the innovations underlying the Alibaba and Toyota deals and ask other sponsors how they can step up their game,” he says. “It may also put pressure on new or existing sponsors to sign deals quicker.”
There’s also a question around whether the sports sector will now see more activity from Chinese brands. Chinese President Xi Jinping has made it clear he wants China to become a force on the global sporting stage – endorsing a national plan to create a sports industry worth CNY5tr (€692bn/$747bn) by 2025. This has undoubtedly stimulated a response from Chinese firms. Aside from Alibaba and Hisense, the sports sector has also seen Dalian Wanda become a partner of Fifa, football’s global governing body. Asked about this point in Davos, Ma said he is keen to “put more money in sport to make people happier and healthier.” He also made an interesting connection with Chinese social policy. “For the last 30 years, China has had the one child per family policy,” he said. “So children are like kings and queens. I think team sport is a way to teach them about teamwork.”
China and The Olympics – Milestones
2001: IOC Awards 2008 Summer Games to Beijing
2004: Lenovo signs up as Beijing 2008 sponsor.
2008: China tops the medal table at Beijing 2008
2014: Youth Olympics Comes To Nanjing
2014: CCTV renews Chinese TV rights for 2018-2024
2015: Beijing Olympic Stadium used for IAAF World Champs
2015: IOC Awards 2022 Winter Games to Beijing
2016: Alibaba signs up as Olympic TOP sponsor