Wow! Yao!

For U.S. brands selling in China, NBA sensation Yao Ming is one hot ticket

In the beginning were Pelé and Ali. Then Michael and Tiger and Lance. And now comes Yao. Athletes who by dint of raw talent, force of will, and power of personality transcend national borders and become mythical figures to people all over the planet. Increasingly, these megastars have also become money and marketing machines. But no sports icon in history has the potential of Shanghai-born Yao Ming, the Houston Rockets center and the epicenter of a campaign by American brands to win the hearts, minds, and pocketbooks of 1.3 billion potential consumers in China's red-hot economy.

Just how big is Yao Ming? So big that there's nowhere he can hide. In early September, Yao flew to the Chinese island of Hainan in the South China Sea to celebrate his 24th birthday in the relative quiet and obscurity of a remote beach resort. He brought along some friends and Rockets strength coach Anthony Falsone. In the mornings, Yao and the 5-foot-7-inch Falsone would sneak out to the beach for a three-mile run, hoping to get in their cardio without much notice. But as the 7-ft.-6-in., 310-pound Yao lumbered along the water's edge, crowds of thrilled tourists would begin running beside him -- snapping photos and begging for autographs -- until there was a horde of smaller beings trampling his footprints in the sand. "It was amazing," Falsone recalls. "There is not a corner of the country where people don't go crazy for Yao."

The scenes of Yao and his giddy herd bring back images of Muhammad Ali being trailed by dozens of schoolkids on his training runs for the "Rumble in the Jungle" prizefight in Zaire 30 years ago. But by then, Ali had long been a global superstar. By contrast, Yao three years ago was a local hotshot in Shanghai and largely unknown beyond China. Now, preparing to enter only his third season in the NBA, he is not just recognized worldwide but could become a real factor in bilateral trade between the U.S. and China.

With his squeaky-clean image (so far) and bashful smile, Yao could be the most effective messenger yet to help American blue chips build business in an economy whose GDP is growing at a robust 9% annual clip. The timing for Yao couldn't be better. The explosion of disposable income in China, its acceptance into the World Trade Organization, its fastidious preparations for the 2008 Beijing Olympics, all combine to elevate China's most familiar face beyond sports hero. "It usually takes five or six years to build a brand," says Columbia University marketing professor Donald E. Sexton, who has taught in China. "Yao has obviously accelerated that for himself and can do that for others in a country that is just beginning to understand brands." Adds Jeffrey Swystun, global director of branding consultancy Interbrand Corp. (OMC ): "If you are teamed up with Yao, you have an instant leg up in a marketplace of a billion people."


Yao's star power will never be more evident than on Oct. 14 and 17, when he returns to China to play for the Rockets in two NBA preseason games against the Sacramento Kings in Shanghai and Beijing. Top U.S. marketing executives will be on the ground, following Yao-mania and using the so-called China Games to wheel and deal new agreements and gain an important first advantage to exploit the 2008 Summer Olympics.

More than 200 million Chinese are expected to watch the NBA's pre-season games on TV -- 70% of the entire U.S. population. "Nobody was more of a global icon than Michael Jordan," says NBA Commissioner David Stern. "But Yao is different....He is a symbol of this Chinese renaissance and their determination to compete on a world stage."

In the two years that he has been their pitchman, Yao is already helping McDonald's sell more Big Macs, Pepsi more soda, and Reebok more basketball shoes in China. McDonald's will nearly double its outlets there to 1,000 by the start of the 2008 Olympics, says Dean Barrett, senior vice-president for global marketing. "[Yao] is a tremendous global asset for us."

Despite this frenzy, Yao has turned down dozens of offers from major companies. Reebok International (RBK ) CEO Paul B. Fireman says that Yao's handlers have done a good job of "not rushing [him] out to every company, not prostituting him." So don't expect to see the big guy sporting a Stetson and pushing cars for a dealership in Sugarland, Tex. His agents, an eclectic bunch called Team Yao, are mostly sticking to what may be a first in the world of sports biz -- a confidential, five-year marketing plan developed with the help of University of Chicago MBA students. Because of his surging popularity, Yao is ahead of schedule, and Team Yao's fear is that he will be overexposed.

So far Team Yao's planning and patience seems to be paying off, however. Yao's four-year contract with the Rockets is worth $18 million, and he earns an estimated $15 million a year in longer-term deals with top-tier brands Pepsi (PEP ), Reebok (RBK ), Gatorade, and McDonald's (MCD ). As his agents strike more deals -- and they say they will pick up the pace in the runup up to the 2008 Olympics -- some executives believe Yao has the potential to gross $300 million in his first 10 years in the league.


The risk for the marketers that have agreed to the multiyear deals Team Yao demands is that Yao never fully develops on the court or that he goes down with an injury. He was selected as the No. 1 pick in the NBA's 2002 draft and has been voted an All-Star in his first two seasons. In terms of his athletic performance, however, Yao is not yet anywhere near Michael Jordan or Ali at their peaks. So Yao is trying to keep his eye on the ball. "What is most important is basketball and my rest," he says.

Staying focused could be hard, though, because Brand Yao is everywhere this fall. In addition to the NBA games in China, a new documentary, called The Year of the Yao, debuted in September at the Toronto International Film Festival. Yao: A Life in Two Worlds, an autobiography co-written with ESPN: The Magazine writer Ric Bucher, was published in early October. And the NBA games in Beijing will be the first time two U.S. pro teams have played each other in mainland China. Needless to say, the Chinese are psyched. Says 34-year-old architect Su Jinsong, a Yao fan from Hangzhou: "His excellent performances in the NBA represent the tough spirit of China's young generation. Yao Ming has brought honor to his homeland."

Yao has endeared himself to America, too, ever since starring in a self-deprecating way in two memorable TV commercials: one for the Apple (AAPL ) G4 Powerbook with the 2-ft.-8-in. actor Verne Troyer (a.k.a. Mini-Me of Austin Powers fame); the other for Visa, which featured the amusing "Yo-Yao" checkout-counter exchange and was first aired before tens of millions of viewers during the 2003 Super Bowl. The ads broke down the mystery of this intimidating giant by showing he can laugh at himself.

The lucky handful of big companies with Yao deals in place say they are already seeing a difference. McDonald's has even gone so far as to appoint him its "first ever worldwide brand ambassador." With Yao as its spokesman, Reebok's Fireman says he could see capturing more than 25% of an estimated $1 billion sneaker business in China by 2008. The company currently does about $30 million in sales there.

PepsiCo Inc., which has an endorsement deal with Yao in China, reports sales are up almost 30% in the past year. Richard Lee, Pepsi's Shanghai-based senior vice-president for marketing in China, says he's not sure he can attribute all of that to Yao. But he points out that Yao's persona is in keeping with Pepsi's slogan "Dare for More." And despite his nice-guy image, Yao is no pushover. When Pepsi competitor Coca-Cola Co. (KO ), a sponsor of the Chinese national basketball team, began using his image on its bottles in China, Yao sued. Coke contended that the government had the rights to his image. A judge disagreed, and Yao won his case.

Many companies that have used Yao to pitch their goods would love to strengthen their ties to him. Walt Disney Co. (DIS ) will show the China exhibition games in the U.S. on its ESPN channel, and its Miramax Books Div. is publishing Yao's life story. But Disney President Robert A. Iger says the entertainment giant wants a broader relationship with Yao.

China is "extremely important" to Disney, says Iger, and Yao "could fit neatly into our approach to building our brands there." Iger envisions Yao helping Disney to open its new theme park in Hong Kong sometime in 2005 or 2006. He could also see Yao introducing the Chinese version of The Wonderful World of Disney TV show, much the same way Walt Disney and later CEO Michael D. Eisner did.

What's the one business with which Yao would really like to partner? Video games, he says. He is an almost obsessive player. But Team Yao is waiting for the right deal, sources say, from industry leader Electronic Arts Inc. (ERTS ) So it may be no coincidence that EA, based in Redwood City, Calif., is planning to build a video-game studio in China. Can a Yao deal be that far off?

At home, Yao has done deals with China Unicom and Internet outfit SOHU. In 2003, SOHU linked up with one of Yao's U.S. corporate partners, trading card company Upper Deck Co., to build and promote the English and Chinese Yao Ming Web sites in an exclusive two-year deal. Marketers say that Yao could prove to be just as invaluable to Chinese companies looking to go global as to U.S. companies seeking business in the Middle Kingdom. "His real power as a marketer, I believe, is outside China," says Terry Rhoads, co-founder of consultants Zou Marketing in China and a former Nike Inc. (NKE ) exec who signed Yao to his first sneaker deal (now expired) when he was playing for the Shanghai Sharks.

Managing this booming enterprise called Yao is a team that by any measure is unique in the fast-paced, hard-nosed business of sports representation. It includes veteran NBA agent Bill A. Duffy, indy movie marketer-turned-agent Bill Sanders, University of Chicago economics professor John Huizinga, and Chinese-born entrepreneur M. Erik Zhang.

Everyone's role in Team Yao is well defined: Duffy, president of BDA Sports Management, oversees relations with the NBA. Sanders, also of BDA, does most of the U.S. sponsorship agreements. Huizinga negotiates the Rockets contract, and Zhang, who is married to Yao's cousin, does the deals in China and serves as part-time counselor to his friend.

How Team Yao came together and developed its five-year marketing plan is a story in itself. It starts with Zhang, who was getting his MBA at the University of Chicago Graduate School of Business. He happened to meet Huizinga, a basketball fanatic and then the B-school's dean of faculty, at an NBA rookie tryout in Chicago in the spring of 2002. Zhang asked for Huizinga's advice, and the professor met with Yao over dinner the next day. Soon, Huizinga was a full-time member of Team Yao. After Yao's selection in the NBA draft, Huizinga suggested that Chicago B-school prof Jonathan K. Frenzen's new-product workshop class might help develop a marketing plan. In the fall of 2002, eight students began working on Yao The Product, conducting focus groups, marketing polls, and dozens of street interviews in China. Team Yao paid more than $60,000 to cover expenses.

"We discovered that the world of possibilities for Yao was vast," says Frenzen, whose students have helped the likes of United Airlines (UALAQ ), Citibank (C ), and Honeywell (HON ) develop marketing plans for products -- but never for a person. The class's 500-page report remains under wraps, and the students had to sign confidentiality agreements. Even Rockets marketing execs could only read the report with someone from Team Yao present.

The guiding principle of the report was patience, says one of the students who helped put it together, Aaron Abraham, 30, now a project manager at Nike. "We knew he had the potential to be a huge gateway to China, and we wanted him to be true to the country's old values but also reflect the newer generation." He says there were no specific financial targets. "It was more strategic," says Abraham. "We were interested in protecting him as a brand." Abraham, citing his confidentiality agreement, declined to provide details from the report.

Team Yao has followed the report's game plan closely but not exclusively, says Sanders. He sees a Yao wave building that will crest at the 2008 Olympics. "The finish line is 2008. Beijing is the big day, the pinnacle of Yao's earning power," says Sanders. "The world will be watching."

Yao is uncomfortable talking about the business side of his life. In his book, he offers up these thoughts on money: "I sweat for every paycheck. If that makes me the best-known capitalist in China today, I don't have a problem with that....I still feel as though whatever money I have in my pocket -- the money I can see and use -- is what I have. And it's definitely all I need....No one making millions can say he really needs the money to live. That's not what it means. It is a way to measure your worth in your job. If my next contract with the Rockets is for more's because I'm worth more to them.

Not exactly the bling-bling talk of a pro jock looking to get his mansion featured on the next episode of MTV Cribs. Offers Yao co-author Bucher: "Yao is constantly deflecting the trappings of fame that people try to put upon him."

Yao lives comfortably in a gated community in Houston. His parents -- he is an only child -- stay with him during the season. He drives a Toyota truck and a custom-fitted BMW 745 (no backseat). His English has improved, but he still travels with an interpreter, Colin Pine, a 30-year-old former State Dept. employee. When Yao doesn't understand something, he will give Pine, always on his right, a gentle nudge.

In order to play in the U.S., Yao first had to reach a financial agreement with China. It has never been revealed how much of his earnings go back to the government in Beijing through payments to his old team, the Shanghai Sharks, and the Chinese Basketball Assn. But sources say it is close to a third of his salary. It could ultimately be more, these sources add, depending on how long he stays in the league and on his success. Team Yao declined to comment.

With the start of the regular NBA season only weeks away, Yao is trying to put aside Yao Inc. to concentrate on hoops. Above all, Yao knows he needs to perform better. So do his bosses. "He has not yet achieved great things in the NBA," says Rockets President and CEO George N. Postolos.

Last year, the Rockets made the playoffs but lost 4-1 to the Los Angeles Lakers. Yao, with an average 17.5 points and nine rebounds per game in the 2003-04 season, has many miles on the court ahead of him before he can hope to match the record of Jordan, who helped deliver six championships to Chicago. Call him a global brand ambassador or marketing marvel, but he'll still need to add "champion" to his titles. Sooner or later, even the biggest man in China must win big to stay big.

By Tom LowryWith Dexter Roberts in Beijing

    Before it's here, it's on the Bloomberg Terminal.