Costly Red Campaign Reaps Meager $18 Million (after spending $100 mil to do it)

Published: March 05, 2007 COLUMBUS, Ohio (AdAge.com) -- It's been a year since the first Red T-shirts hit Gap shelves in London, and a parade of celebrity-splashed events has followed: Steven Spielberg smiling down from billboards in San Francisco; Christy Turlington striking a yoga pose in a New Yorker ad; Bono cruising Chicago's Michigan Avenue with Oprah Winfrey, eagerly snapping up Red products; Chris Rock appearing in Motorola TV spots ("Use Red, nobody's dead"); and the Red room at the Grammy Awards. So you'd expect the money raised to be, well, big, right? Maybe $50 million, or even $100 million.

The disproportionate ratio between the marketing outlay and the money raised is drawing concern among nonprofit watchdogs, cause-marketing experts and even executives in the ad business. It threatens to spur a backlash, not just against the Red campaign -- which ambitiously set out to change the cause-marketing model by allowing partners to profit from charity -- but also for the brands involved.

Enormous outlay By any measure, the buzz has been extraordinary and the collective marketing outlay by Gap, Apple and Motorola has been enormous, with some estimates as high as $100 million. Gap alone spent $7.8 million of its $58 million outlay on Red during last year's fourth quarter, according to Nielsen Media Research's Nielsen Adviews.

But contributions don't seem to be living up to the hype. Richard Feachem, executive director of the Global Fund to Fight AIDS, Tuberculosis and Malaria, the recipient of money raised by Red, told The Boston Globe in December, "We may be over the $100 million mark by the end of Christmas."

Rajesh Anandan, the Global Fund's head of private-sector partnerships, said Mr. Feachem was misquoted, and defended the efforts by Red to increase the Global Fund's private-sector donations, which totaled just $5 million from 2002 to 2005. (The U.S. Congress just approved a $724 million pledge to the Global Fund, on top of $1.9 billion already given and $650 million from the Bill & Melinda Gates Foundation.)

'Hugely frontloaded' "Red has done as much as we could have hoped for in the short time it has been up and running," he said, adding: "The launch cost of this kind of campaign is going to be hugely frontloaded. It's a very costly exercise."

Julie Cordua, VP-marketing at Red and a former Motorola marketing exec and director-buzz marketing at Helio, said the outlay by the program's partners must be understood within the context of the campaign's goal: sustainability. "It's not a charity program of them writing a one-time check. It has to make good business sense for the company so the money will continue to flow to the Global Fund over time." She added that since many of Red's partners haven't closed their books yet on 2006, more funds likely will be added to the $18 million.

But is the rise of philanthropic fashionistas decked out in Red T-shirts and iPods really the best way to save a child dying of AIDS in Africa?

Parody mocks Bono The campaign's inherent appeal to conspicuous consumption has spurred a parody by a group of San Francisco designers and artists, who take issue with Bono's rallying cry. "Shopping is not a solution. Buy less. Give more," is the message at buylesscrap.org, which encourages people to give directly to the Global Fund.

"The Red campaign proposes consumption as the cure to the world's evils," said Ben Davis, creative director at Word Pictures Ideas, co-creator of the site. "Can't we just focus on the real solution -- giving money?"

Trent Stamp, president of Charity Navigator, which rates the spending practices of 5,000 nonprofits, said he's concerned about the campaign's impact on the next generation. "The Red campaign can be a good start or it can be a colossal waste of money, and it all depends on whether this edgy, innovative campaign inspires young people to be better citizens or just gives them an excuse to feel good about themselves while they buy an overpriced item they don't really need."

Fears of nonprofits Mark Rosenman, a longtime activist in the nonprofit sector and a public-service professor at the Union Institute & University in Cincinnati, said the disparity between the marketing outlay and the money raised by Red is illustrative of some of the biggest fears of nonprofits in the U.S.

"There is a broadening concern that business is taking on the patina of philanthropy and crowding out philanthropic activity and even substituting for it," he said. "It benefits the for-profit partners much more than the charitable causes."

The Big Question: Does the RED campaign help big Western brands more than Africa?
By Paul Vallely
Published: 09 March 2007
Why are doubts being raised?

The American advertising trade magazine Ad Age claimed in its cover story this week that the U2 front man's idea to raise money for the Global Fund to Fight Aids in Africa by selling RED products has "raised a meagre $18m [£9.3m]... in a year" despite a marketing outlay by Gap, Apple and Motorola and others estimated to be as high as $100m. The ratio between the marketing money spent and the amount raised for Africa was thus very poor, it claimed.

How much has RED raised to fight Aids?

The figure is actually $25m during the six months since the RED product range was launched in the United States last October. That is five times the amount given to the Global Fund by the private sector over the previous four years. Which is a pretty significant increase by anybody's standards.

Ah, but how much has it cost to raise it?

Certainly not the $100m Ad Age claimed. The biggest spender of the big brand names that have launched RED products was the clothing company Gap. Its total advertising budget for its RED launch was $7.8m. Even adding in the money spent by the other RED firms - Apple, Motorola, Converse sneakers and Giorgio Armani (the RED Amex card is only available in the UK not the US) - the total spend of advertising, RED sources suggest, was less than a third of the $100m cited in the magazine.

Ad Age, noticeably, cited no source for its $100m, which it presented with the weasel words that "some [people] estimate" without saying who, or how the figure was arrived at.

Experts in the US advertising industry reckon that the magazine added together a variety of figures, such as, one insider suggested, estimates of "the value of the TV, billboard, print and interactive ads as well as a content integration play, in-store materials and a pop-up store that was employed by one of the partners". There was even a suggestion that it included an estimate of the time Bono received on prime time TV shows such as Oprah, and what it would have cost to buy that time at advertising rates.

"It was a phantom number Ad Age pulled out of thin air," a spokeswoman for RED said. "The maths just simply doesn't make sense."

Even so, is that a good rate of return?

Most businesses would think that to raise $25m in just six months on an investment of well under $40m was a staggeringly good rate of return. But to ask that question is to make a fundamental muddle. Gap, Motorola, Converse, Apple and the rest would have spent that money to market their T-shirts, phones, trainers and iPod nanos anyway. The marketing men and women wouldn't otherwise have spent less and given the balance of their budget to the Global Fund.

So what happened was that existing marketing money was used both to raise awareness of the scale of the Aids epidemic in Africa - something that was nowhere near as well-publicised in the US as it was in the UK - and at the same time to promote RED products. Half the profits from those products were allocated to the Global Fund, which suggests that the actual rate of return was $50m total profit on less than $40m outlay.

So has big business done better out of this than poor Africans?

The idea behind Product RED was always that it would create a win-win result. The firms with RED products would do better and so would Africans with Aids. Some charity activists in the United States have been critical of the RED initiative, arguing that it allows firms to take on the patina of philanthropy while cutting their real charitable giving.

But the facts suggest this argument is flawed. The "corporate social responsibility" budgets of most firms are dwarfed by their marketing budgets. Donations to charity tend to be given as one-off cheques. What the RED initiative has set out to do - and with some success if $25m in six months is half the profits RED products have made - is create a stream of revenue for the fight against Aids in Africa which will far exceed one-off payments from corporate philanthropy budgets. It looks set to create a major source of cash for the Global Fund, and one which is sustainable. It is an entirely new model for fund-raising.

But wouldn't people be better off giving more to charity rather than buying luxury items they don't need?

If only that were the choice. But most people wouldn't give the cost of a new iPod to the Global Fund. Some idealists might hope so. The Ad Age article was inspired by a website called www.buylesscrap.org which attacks Product RED for proposing consumption as the cure to the world's evils. "Can't we just focus on the real solution - giving money?" it says.

This is a rather romantic, and American, notion. Private charitable giving has never offered a solution to the major structural problems in the Third World. At best, charities like aid agencies create exemplars of ideal projects, or help build a public mood that something has to be done, forcing governments to act. Aids is too massive a problem for anyone but governments to tackle.

Bono set up RED because he thought that Make Poverty History, Live8 and the One Campaign (a massive lobby in the United States) had successfully put on the pressure to get governmental action at the international level. But not every one wants to join such campaigns. And not everyone gives to charities. There were two areas yet untapped - the private sector and consumers who like buying stuff, like the idea of helping others, but who are too idle or too self-centred to actually get up and do anything. RED was the attempt to draw into the wider coalition for Africa people who, if they didn't buy a RED iPod would just have bought one of another colour.

So, has RED been a success or a failure so far?

The money RED has raised means that some 160,000 Africans will be put on life-saving anti-retrovirals in the coming months, orphans are being fed and kept in school in Swaziland and a national HIV treatment and prevention programme has begun in Rwanda. Some 99 per cent of funds raised go directly to life-saving schemes.

Motorola is printing the packaging for its RED phones in Africa - a requirement agreed to by each RED brand - to help boost African local economies.

Data collected for RED's chief executive, Bobby Shriver, shows that people who became aware of crises through Red's marketing have increased their charitable giving, rather than thinking they have done enough by buying RED.

The United States anti-Aids strategy, with strong personal backing from President George Bush, is now funded to the tune of $15bn a year. The US Congress has just agreed a record $724m donation to the Global Fund for 2007. It is all the result of concerted political pressure of which Red, with its constant advertising exposure of the message that "6,500 Africans died needlessly yesterday of a preventable and treatable disease" has been a key part.

Is RED a big flop?

It all sounds like a pretty convincing success story to me. Buy Less Crap? The only people who seem to need to take that advice are the editorial staff of an American trade magazine called Ad Age.

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