A few of the latest Formula 1 sponsorship trends based on analysing how the current sponsors compare now to how they did in 2021

Formula 1 sponsorship trends: software powers up the charts

Although Auto Components (e.g. tyres, oil, car paint etc) unsurprisingly remain the most common sponsor category across Formula 1, Software has seen the biggest rise in the number of deals and has overtaken Clothing/Apparel brands as the second most prevalent category.

This is because F1’s emphasis around technology and innovation is a naturally strong fit with software and, consequently, is a great vehicle (pardon the pun) for software firms to showcase their capabilities to a wide audience.

Although software brands don’t particularly target younger demographics from a purchasing perspective, many of the deals are centred around helping the teams to engage more effectively with that fanbase, particularly on social, app and web channels.

For example, Oracle’s deal with Red Bull Racing included creating a digital loyalty and rewards-based fan engagement program called The Paddock. This was powered by Oracle Cloud Customer Experience (CX) technology.

Formula 1 sponsorship trends: alcohol and payments  top up

Somewhat surprisingly in today’s socially-conscious world (i.e. a link between drinking and driving), Alcohol has seen the second biggest jump in activity over the last few years, with less mainstream brands coming to the party such as whiskey brand Whistle Pig (Kick Sauber) and NEFT Vodka (Racing Bulls).

The drink-driving issue has been addressed straight on by a couple of brands (Peroni’s $11m a year with Ferrari and Heineken with Red Bull Racing) using it to promote their zero-alcohol versions and responsible drinking.

Payments/Transfer brands have also seen a big jump in activity. These include both traditional powerhouses such as American Express (with F1 itself) and MoneyGram (Haas) and newer players such as Australian-founded Airwallex (McLaren) and Canada-based Nuvei (Mercedes).

F1 clearly brings all these brands global awareness (and credibility for the newer players), particularly important when dealing with international payment related companies. However, the ‘setup’ or activation of the deals can be done in very different ways.

For example, a major part of AMEX’s deal with F1 and Visa’s with the Red Bull teams (business to consumer brands) are offering exclusive access and unique experiences to their card members. While, Airwallex’s deal with McLaren (a business to business brand) is much more of a product integration; Airwallex will support McLaren’s financial operations and deliver efficiencies across the numerous multi-currency transactions an F1 team has to make around the world.

Formula 1 sponsorship trends: a rich person’s game

The average reported deal value among F1 rights holders over the last few years is around $37 million per year – topped by Oracle’s $100 million deal with Red Bull Racing and HP’s $90 million with Ferrari. In turn, the average company revenue of around half the current sponsors we analysed is around $28 billion.

The image below shows a selection of reported deal values and the accompanying annual revenue of the sponsor.

A general rule of thumb in the industry when looking for companies that can afford the cost of a particular sponsorship is that it represents around 1% of revenue (i.e. if sponsorship costs $1m, look at companies with annual revenue of $100m+).

However, for F1 rights holders based on these smallish sample sizes (but acknowledging reported values tend to be skewed towards the bigger deals), the figure is 0.13%. A figure that is very similar for the four tennis grand slams.

In other words, if the rule of thumb becomes 0.13% rather than 1%, rights holders whose rights cost $1m should be targeting companies whose annual revenue is at least $770 million. If your rights are $100k, the target should be companies above $77 million.

If all sponsorship deals mirrored the extreme case of Shell and Ferrari in the table above, for example, then the ratio would be 0.012% of revenue. In this case, rights holders selling $1 million deals would need to be targeting companies whose annual revenue is over $8.35 billion.