Chinese sponsors of the upcoming Summer Olympics in Beijing are facing what may be a long and arduous climb toward seeing benefits for their substantial investments. Aside from the bevy of industry-leading companies in China, there are a few who are hoping for a boost in their market shares as a result of their sponsorship status. Some are hoping that the Olympics will provide them with the opportunity to catch up, or even overtake their competitors.
While analysts are claiming that sponsorship of the Games have been showing a small boost, the effect so far has been both minimal and temporary. The effect, for the most part, shows the potential for benefits in China’s consumer market being far less than anticipated. For many, the wait may be longer than expected before seeing a return on their investment in the largest sporting event in the world.
One such company is Sohu.com, a Beijing-based internet portal listed on NASDAQ (SOHU). Before sponsorship of the Games, Sohu.com was ranked second behind China’s portal leader, Sina. According to BDA China, a consulting company, Sohu’s market share since becoming a sponsor in November of 2005 is 13.7%. This is compared with the 19.4% market share that Sina currently enjoys. In addition to their lower market share, Sohu is also showing a year-on-year revenue gain on par with Sina, leading to the belief that their sponsorship thus far is not reaping the big rewards initially expected.
What companies like Sohu may fail to notice is that sponsorship of the Olympic Games rarely yields high results within the first few years. Large global brands which have benefitted from major Olympic sponsorship in the past are the ones who have done so over a longer period of time; on average a decade or longer.
Sohu tried to capitalize on its Olympic advantage only to be tossed into a whirlwind of negative responses from other companies. Sohu made the claim last year that they had exclusive rights to advertising from other Olympic sponsors as a result of their deal. Sina, along with other Chinese internet companies, led an opposition to this, which resulted in the Beijing Olympic Committee ruling that the exclusive rights pertained only to China, and that international sponsors were exempt from this rule.
All hope is not lost for Sohu, however, as China currently has what many consider to be the largest internet user base. In 2007, Sohu showed a 42% increase in brand-advertising and a 30% increase in overall advertising revenue compared to the previous year. It is evident that the Internet market in China is seeing a healthy growth, and sponsors like Sohu may only need to wait it out before reaping in the benefits of their investment in the Olympic Games.
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