Gerald Steven

Controversial advertisements: should companies “Just Do It”?

The Nike/Kaepernick ad incited huge boycotts against their brand, but the end result might have justified this risky campaign

By: Gerald Steven

The Nike/Kaepernick ad incited huge boycotts against their brand, but the end result might have justified this risky campaign

On the 30th anniversary of Nike’s “Just Do It” campaign, Nike released one of it’s most controversial ad campaigns yet. With Colin Kaepernick as the new face of Nike, his face is placed front and center, along with the statement, “Believe in something. Even if it means sacrificing everything.”

What is most controversial about this campaign is not the statement itself, but rather the man behind the statement. The former San Francisco 49ers quarterback has recently captured the media’s attention for protesting against police brutality by kneeling during the national anthem – an act criticized by some football fans for being disrespectful to the country and to the American flag.

Nike has faced backlash ever since they hired Kaepernick. Many fans have criticised Nike and resorted to boycotting their products. Videos have gone viral of people burning Nike apparel they have bought as an illustration of their loyalty to the American flag. Country singer, John Rich, famously tweeted a photo of a former Marine who cut off the Nike logo on his socks. If there is so much resentment towards the ad, then it seems fair to ask if releasing the campaign was worth the overall cost.

On one hand, there is the financial cost of hiring Kaepernick for their campaign. Though Nike has not yet released an official statement of how much they paid Kaepernick, sport agents estimate that their contract is worth several million dollars. Nike has been known to sponsor athletes with tens of millions of dollars in the past. In 2003, Nike signed a $50 million contract with Serena Williams. The amount of exposure that the campaign with Kaepernick has generated could suggest that Nike’s contract could be worth more.

On the other hand, there is the implicit cost, which includes how much they have lost after consumers decided to boycott their products. Shortly after releasing the campaign, Nike lost an estimated $3.75 billion in market capitalization, which refers to the market value of Nike’s outstanding shares of stock. Shares of NKE stock also dropped by 4 percent around the same time #NikeBoycott was trending on Twitter. But calculating how much Nike actually lost can be more difficult that it seems. One challenge to calculating the cost is the fact that some people actually bought Nike products just so they can destroy them afterwards. Such an act would not cost Nike, but would instead generate revenue for the company. Another challenge is that it is difficult to determine how much of the decrease in Nike’s market cap can be directly attributed to the ad campaign versus  other market forces.

Nike’s loss, however, seemed to be short-lived. During Labour Day weekend, around a week after they released the campaign, Nike’s sales increased by 31%. Around the same time last year, Nike’s sales only increased by 17%, which means that their sales doubled during the same period of the year. The overall increase is also reflected in their share price, which rebounded and reached an all time high; increasing from slightly under $80.00 to $83.83.

Monetary value was not the only thing that Nike gained from the campaign. According to Christopher Svezia, an analyst at Wedbush, Nike gained over 170,000 new followers on Instagram after the campaign. Younger consumers also seemed to approve of the campaign much more than older consumers. A Quinnipiac University poll revealed that 67% of Americans aged 18 to 34 approved of the campaign, 29% of young men said they would buy Nike products because of the campaign. In spite of the boycott, the campaign was still successful in allowing Nike to reach out to more consumers.

Nike’s loss and eventual gain seem to follow a similar pattern that occurs whenever companies release a controversial advertisement. In April 2017, Pepsi released a highly criticised commercial featuring Kendall Jenner. The commercial portrays Kendall Jenner in a protest, and then giving a can of Pepsi to an officer, which sets off an outburst of approval from protesters and a smile from the officer. The commercial was widely criticised for trivialising real civil rights movements, such as Black Lives Matter. Elle Hearns, a former event organizer for Black Lives Matter, stated that the commercial “plays down the sacrifices people have historically taken in utilizing protests.”

A week after Pepsi aired the commercial, the percentage of adults who stated they would consider buying Pepsi decreased. Ted Marzilli, CEO and Analyst at Data Products, found that before the commercial was aired, 28% of adults would buy Pepsi, but after the commercial, that percentage dropped to 20%. In spite of the decline in popularity, Pepsi eventually gained profit. PepsiCo reported that their revenue increased by 2%, which generated a net income of $2.1 billion for the second quarter of 2017. The company’s stock also increased by 0.3% to $113.93. Pepsi’s overall performance after releasing the commercial mirrors Nike’s. Nonetheless, it is still difficult to determine if Pepsi’s profits were caused by the commercial alone or by other factors.

If Nike was able to make profit despite causing the controversy, then was releasing the campaign worth the cost? To some companies, releasing such a controversial advertisement can be risky, and could potentially do more harm than good to a company’s reputation. In Nike’s case, releasing the Kaepernick campaign allowed Nike to gain more popularity and be in a better financial state than before. Regardless of whether Nike succeeded or failed, the company has reminded its audience an important lesson: with great risks, comes great reward.

Works cited

Abad-Santos, A. (2018, September 6). Watch: Nike’s powerful Colin Kaepernick commercial. Vox. Retrieved from https://www.vox.com/2018/9/5/17823804/nike-kaepernick-nfl-commercial-boycott

Berr, J. (2018, September 18). Nike stock price reaches all-time high after Colin Kaepernick ad. CBS News. Retrieved from https://www.cbsnews.com/news/nike-stock-price-reaches-all-time-high-despite-colin-kaepernick-ad-boycott/

Bomey, N., and Meyer, Z. (2017, July 11). PepsiCo sweetens profits despite Kendall Jenner debacle. USA Today. Retrieved from https://www.usatoday.com/story/money/2017/07/11/pepsico-earnings/465488001/

Calfas, J. (2018, September 4). Here’s How Much Colin Kaepernick Will Make in His Controversial New Ad with Nike, According to Sports Experts. Time. Retrieved from http://time.com/money/5386086/colin-kaepernick-nike-deal/

Maglio, T. (2018, September 4). Nike Loses $3.75 Billion in Market Cap After Colin Kaepernick Named Face of “Just Do It” Ads. The Wrap. Retrieved from https://www.thewrap.com/colin-kaepernick-nike-stock-loses-4-billion-market-cap/.

Marzili, T. (2017, April 19). Pepsi recovering slowly since pulling Kendal Jenner ad. YouGov. Retrieved from https://today.yougov.com/topics/food/articles-reports/2017/04/19/pepsi-recovering-slowly-pulling-kendall-jenner-ad

Victor, D. (2017, April 5). Pepsi Pull Ad Accused of Trivializing Black Lives Matter. New York Times. Retrieved from https://www.nytimes.com/2017/04/05/business/kendall-jenner-pepsi-ad.html

Zauzmer, E. (2018, September 9). Nike Sales Increase 31 Percent After Controversial Colin Kaepernick Ad Campaign Debuts. People. Retrieved from https://people.com/sports/nike-sales-increase-colin-kaepernick-ad/

 

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