The crypto reckoning is upon us, and Formula 1 will feel its pain.
Mercedes-AMG Formula 1 team sponsor, FTX, has gotten into significant financial trouble and didn’t even have enough money to cash out many withdrawals. In addition to the investigation from the SEC, this partnership is dead.
And just this week, Scuderia Ferrari cut ties with Blockchain company Velas while AlphaTauri not only lost Fantom, they removed “cryptocurrency sponsors” language from their website altogether.
Implications Across Formula 1
Last October, I talked about crypto being the new cigarette in motorsport — with many crypto sponsors flocking to Formula 1 and many other sports (the Los Angeles Lakers arena was renamed Crypto.com Arena, and the Miami Heat play at FTX Arena).
In October of 2021, I made this TikTok, which I’m not embarrassed about at all…
But the more I think of it, the more Crypto is like the cigarette. It just didn’t stick around nearly as long. Just like the prices of crypto coins, sponsorships have come and gone.
Mercedes is likely to have received its payments from FTX in full, so replacing the sponsorship won’t be that daunting for an operation with the brand and drivers Mercedes has.
But what will this mean for sponsors in the future?
While there’s already a lot of due diligence in these types of deals, I suspect that F1 teams will look at emerging industries with much more caution. This is also why we see an uptick in US-based tech firms, ones that have history and actual revenue and are less likely to disappear overnight.
Amazon Web Services (AWS)
Formula 1 isn’t cheap to sponsor by any stretch. Just one look at Oracle’s sponsorship of Red Bull Racing, the deal is for five years and worth $500 million.
AMD’s CMO, John Taylor has shared in the past that on broadcast brand exposure alone, he saw a 14.5X return on their investment.
“In addition to reach, we look closely at engagement and we’ve found that incorporating McLaren into our campaigns, content, and flagship events have delivered as much as a 50 percent boost in engagement among our key audiences. But the nature of the partnership is about so much more. We’re always looking for opportunities to work together to drive the type of innovation that makes a lasting impact on our world. From addressing sustainability across the industry to developing the next generation of technology leaders through STEM education, our partnership continues to be a multi-faceted one with a greater purpose.”
Dell SVP of Brand, Liz Matthews
Cognizant has also found that its association with Formula 1 has had a positive impact on winning the race for talent. According to CMO Gurav Chand, the F1 partnership is integral to talent acquisition and retention. “We’re using a lot of the car imagery in our advertising across the US, Europe, and India for talent recruiting. Last year over an eight-month period, those ads generated direct click-throughs of about 500,000 candidates to the Cognizant recruitment site. And what’s even more amazing is 33,000 candidates applied on the spot.”
In addition to the business benefits of sponsorship, brand marketers are getting personal enjoyment from being associated with Formula 1. “I have enjoyed working with F1 drivers like Daniel Ricciardo during COVID to build engaging experiences for fans like the AWS DeepRacer F1 partnership,” shared AWS VP, Rachel Thornton.
“During the week of the USGP last fall, we helped open a new STEM learning center at a high school in our hometown of Austin, Texas,” said Dell’s Matthews. “Lando Norris, Daniel Ricciardo, and the entire McLaren team came to support, speaking with the students about how they use their STEM skills in Formula 1.”
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