Woods’ scandal costs sponsors $5 to $12 billion

Sponsors of golf superstar Tiger Woods have lost around $5 to $12 billion since reports of his extramarital affairs broke out, a new survey has said. The new study by the University of California, Davis (UC Davis) examined stock market returns for the 13 trading days that fell between November 27, the date of Woods’ car crash and December 17, a week after the sports champion announced his indefinite leave from the golf. Two UC Davis economics professors, Victor Stango and Christopher Knittel looked at eight of his sponsors – Accenture, AT&T, Tiger Woods PGA Tour Golf (Electronic Arts), Gillette (Proctor and Gamble), Nike, Gatorade (PepsiCo), TLC Laser Eye Centers and Golf Digest (Conde Nast).

“Total shareholder losses may exceed several decades’ worth of Tiger Woods’ personal endorsement income,” said Stango, noting that these are separate and much larger than the golfer’s own earnings, who before the scandal got about $100 million a year in endorsement income, more than any other athlete. “This pattern of losses is unlikely to stem from ordinary day-to-day variation in their stock prices,” the researchers said, based on conclusions that the scandal reduced shareholder value in the sponsor companies by 2.3 per cent, or about $12 billion.

The study also finds that three sports-related companies – PGA Tour Golf, Gatorade and Nike – have been worst hit, experiencing a 4.3% drop in stock value, equivalent to about $6 billion. “Our findings speak to a larger question of general interest in the business and academic communities: Does celebrity sponsorship have any impact on a firm’s bottom line”” Stango said. “Our analysis makes clear that while having a celebrity of Tiger Woods’ stature as an endorser has undeniable upside, the downside risk is sustainable too.

The scandal exploded following an accident on November 27 when Woods crashed his SUV outside his Florida mansion sustaining minor injuries. His wife Elin had to use a golf club to break the back window of the SUV to rescue him. The accident may have occurred following a fight with Elin accusing her husband of having an extramarital affair. Since then, ten women have claimed to have been involved with Woods, out of which eight have been named. Since the day of the accident, Woods has not been seen in public and US tabloids are reporting that this may be due to cosmetic surgery to repair a broken tooth following a fight with his wife who chanced upon a text message from one of theĀ  woman he was having an affair.

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Microsoft pegs China search market as top priority

China is a vital market for Microsoft’s Web search business, as it chases leaders Baidu and Google in the world’s biggest Internet market, the world’s largest software maker said. Since launching its English-language Bing search site in June, Microsoft has been gaining steady share in the United States, with 10.3% in November versus 17.5% for Yahoo and 65.6% for dominant player Google, according to comScore. Microsoft hopes to get off to a similar fast with its Chinese-language Bing site, which is still in its beta phase following a low-key launch in June. “Microsoft is committed to the China market and the search market in China is the most important strategic market for Microsoft,” the company said on Tuesday.

“We specially set the search technology center in China to get a deeper understanding of what Chinese users need, to be able to deliver the best product to them.” China’s Internet market is a hot spot for global companies looking to expand overseas, but localization issues and tough domestic competition have made it tough to crack for global titans such as Yahoo, eBay and Amazon. China’s search market was worth $293 million in the third quarter, up 38% with homegrown leader Baidu well ahead with 63.9% followed by Google at 31.3%, according to search firm Analysis International.

“Google is taking a big share of the China market, roughly 30% but it is not yet threatening Baidu. Bing is still very far away,” said Credit Suisse analyst Wallace Cheung. Analysts analyst Jin Naili said users will need time to try out and get used to Bing before it has any chance of becoming a serious rival to any of the established players. But she added that since Microsoft launched Bing’s China beta versions in June, the number of users who have visited the site at least three months has increased 30% as of October.

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