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Does Yingli Solar Really Belong at the World Cup?

by Michael Levi
July 7, 2010

Yingli Solar, the Chinese rooftop solar photovoltaic company, has been making waves with its prominent sponsorship of the 2010 FIFA World Cup. The Times picked up the story yesterday, quoting a Yingli spokesperson who said that the company “pondered” its decision “profoundly, deeply”. My colleague Liz Economy flagged the sponsorship last week. Noting that Yingli’s ads were running next to ones from McDonalds, she worried that China was embracing the future while U.S. companies were stuck representing the past.

I’m not so much worried as I am puzzled by Yingli’s decision to buy such an expensive sponsorship. Take a look at the other sponsors at the same tier: Budweiser, BP Castrol, Continental tires, McDonald’s, MTN (a South African cellular company), Mahindra Satyam (an Indian IT services company), and Seara (a Brazil-based global food company). They are almost all consumer products companies – precisely the sort of company that’s most likely to benefit from sponsorship of an event like the World Cup. (All six higher-tier sponsors are consumer products companies too.) Mahindra Satyam is clearest exception, though it’s worth noting that its sponsorship deal also benefits automaker Mahindra and Mahindra, which is a part owner through Mahindra Tech.

Yingli, in contrast, strikes me more like a business-to-business operation. If solar PV is going to make it big, it’s not going to be because individual consumers are taking the time to differentiate among solar panel manufacturers. It’s going to be because consumers have bought a package of services from a local business that provides not only the panels but also installation, financing, and maintenance. That’s the brand that consumers will look at. The local provider will do the comparison-shopping among panel makers for them in order to minimize its costs.

Yet companies that are selling primarily to other businesses don’t tend to drop the kind of cash that Yingli is on advertising. Several reports (including the Times one) peg the sponsorship at north of $20 million, while one rumor in China apparently has it at $80 million. The best I can figure out is based on this report, which would have the sponsorship at $10-$25 million annually, or $40-$100 million over its four year life. If you figure that the bulk of the value from the sponsorship accrues this year, that works out to about 4-10% of its roughly $1 billion in annual revenue. That is an unusually high fraction of revenue for a B2B company to be spending on advertising. My understanding is that these sorts of companies typically spend 1-2% of revenue on advertising, since their customers are focused primarily on cost and benefit, not brand; numbers like Yingli’s are more typical of companies that are marketing directly to consumers, where branding matters much more.

What might explain the difference? One possibility is that Yingli sees the near-term solar landscape much more like a consumer goods play. Solar is still a relatively expensive and niche market. People who are installing it are often as interested in making a lifestyle statement as they are about calculating costs and benefits. If they associate Yingli will nice things like the World Cup, they might be more willing to buy. The other possibility, of course, is the Yingli has made a bad investment choice. Perhaps by 2014, when we see who chooses to advertise at the next World Cup, we’ll know the answer.

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  • Posted by pacer

    Or that it’s more about driving share prices than selling solar units, and Yingli’s target audience was stockmarket investors not greenie homeowners.

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