What Nike’s $1 Billion Ronaldo Deal Means (NKE)

A recent Business Insider survey on new digital media trends highlights growth prospects for influencer marketing as part of a larger shift to social media marketing across industries. In general, influencer marketing helps companies reach Millennials, produces “more authentic storytelling,” better connects with consumers and offers a higher return on investment (ROI) than other channels.

 Nike Inc.’s (NKE) latest headline deal with soccer superstar Cristiano Ronaldo—a lifetime contract worth $1 billion—is a prime example of these shifting marketing strategies, offering firms greater reach at a lower cost. 

Alternative Channels 

With traditional advertising on the downswing, large corporations are increasingly looking to alternative channels to get their message out. Almost every major consumer products company is seeking out celebrity endorsers, from Michael Phelps’ deal with Kellogg Co. (K) and Mike Tyson’s new stint with a controversial e-trading platform to Donald Trump’s former involvement with brands ranging from Macy’s Inc. (M) to McDonald’s Corp. (MCD). (See also: Mike Tyson Endorses a Trading Software Platform.)

While Nike’s deal with Ronaldo, who earned $88 million in 2016, may seem inflated, data show that Nike may be positioned to gain big time, fast. The Beaverton, Ore.-based sportswear leader indicated that it chose the Real Madrid star due to his social media presence. Ronaldo reaches a growing 262 million fans across various platforms, standing as the most followed person in Facebook Inc. (FB) history. A recent Hookit report indicates Ronaldo’s social media presence generated $474 million in value for Nike just last year. If the fruits of this partnership continue with equal or greater momentum, it would take Nike only about two years to regain its investment.

The Nike-Ronaldo deal highlights the growing importance of mega-influencers across industries, particularly in the consumer goods space. For athletic apparel companies, the sales upside from social media influencers may be even greater, as brand reputation is strongly associated with symbols on clothing and shoes.