Under Armour vs. Nike: How Does a Newcomer Win a Voice From the Industry Giant? | The Ad Wars ①

Advertising is one of the most direct reflections of corporate competition. Behind the brawling on screen, what shifts in the sporting-goods industry are playing out?

"There is no final defeat."

That is how Roger A. Enrico, then president and CEO of the Pepsi-Cola Company, summed up the "Cola Wars" ad battle fought between Pepsi and Coca-Cola in the 1960s.

It is one of the earliest cases in marketing history, and still one of the best. By challenging Coca-Cola, Pepsi took the No. 2 spot in the market, and Coca-Cola grew stronger through the fight. All that consumer attention expanded the whole market.

But as Enrico also said, the trick is that the "Cola Wars" have to be fun. If the war looks like one company is on the ropes, doomed and beyond saving, the mood of the game sours at once.

The war has to feel bloodless and endless. Everyone's interest lies in keeping the public curious: all right, this is what Pepsi did today — can you imagine what Coca-Cola will do tomorrow?

Ad wars between big companies, full of rivalry and attack, have never stopped — Microsoft and Apple, Burger King and McDonald's, Nike and Under Armour, Mercedes-Benz and BMW.

Yet the differences between them are subtle. Apple ran a series of ads taunting IBM in the 1980s, switched its target to Microsoft in the 1990s, and has now become the one being challenged. The "ad war" between BMW and Mercedes-Benz reads more like two best frenemies. Working out these differences is an interesting process.

That is one reason we are launching this series. More important, behind every "ad war" is a corporate fight — sometimes an even match, sometimes a new challenger on the rise. Through that window you can see how a market is shifting and how the balance of voice changes hands.

In their ads they open fire on each other's stupidities. In reality, the fighting between them uses live ammunition.

We are talking about advertising, but never only about advertising.

Since Nike coined "Just Do It" in 1988, it has been the most powerful language Nike uses to speak to consumers. Together with the swoosh, the line made Nike part of hip-hop and sports culture. Today Forbes ranks Nike the most valuable apparel brand, and Nike sits at No. 18 on Interbrand's latest Top 100 list.

That result itself reflects a shift in the sporting-goods market. Nike once used the cool of "I'm younger" to challenge the giant it faced at the time, Adidas. Starting last year, Under Armour — having passed Adidas to take the No. 2 spot in the U.S. market — began challenging Nike with the same kind of ambition. And after all those years of fighting Nike, Adidas suddenly found a "third party" in the picture.

Apart from core "sports technology," advertising is the thing sporting-goods brands control most tightly. Nike spent $3.28 billion on marketing in 2016, and Under Armour, Nike's biggest threat right now, has already spelled out in its financial filings how much it will spend on marketing over the next five years.

Only in the past few years did Under Armour start pouring money into marketing, reaching the consumers who used to see the brand as "for muscle guys only." Nike, meanwhile, is at the peak of its global performance: nine of the ten most-watched ads on Nike's YouTube channel went up within the past year.

"In the industry I'm in, a T-shirt or a pair of shoes is still made the same way it was made 80 years ago." Kevin Plank, the Under Armour founder who said this, meant to argue that the industry needs "product innovation." But his description of the industry is not wrong: when sportswear performs about the same, whoever markets it better may decide which one you buy.

Advertising also lets you trace the shifts in the whole sports market, and the showdown of the past two years has been especially good — Under Armour, in its dark workout gear, climbed to the spot right behind Nike in less than half the time Nike took. Adrienne Lofton, the company's global vice president of brand management, calls UA the underdog: the one nobody picks to win, with higher risk and higher odds.

In marketing, UA and Nike are more like a challenger and a defending champion, and the side on the attack always has more stories. So let's start with the challenger, the more dramatic of the two.

As a newcomer, the language and the style always run sharper, to grab attention

Anyone who knows Under Armour knows it was built on moisture-wicking shirts, which means its earliest competition with Nike also grew out of an old kind of business opportunity: reading a niche market.

In 1996, the year Nike officially signed Tiger Woods, Kevin Plank and his moisture-wicking shirts were catching on among America's top football players, gradually attaching themselves to muscle and fitness, and slowly winning over people who trained seriously.

In 2003, Under Armour released its first TV commercial, Protect This House, shot in a gym. If you follow football, "Protect This House" is standard pregame pep-talk language. Under Armour's ads are good at using moments of pain to build a brand image that is hard, wild, combative and driven, and football, the violent sport Americans love, suits that. David Weiner, a senior analyst at Deutsche Bank, said: "Under Armour has managed to be different — a homegrown feel — unlike Nike, which feels like a more corporate, more monopolistic company."

UA announces "I am the tougher sports brand" at every turn. That hard advertising style has continued to this day, and it is the most important asset separating UA from Nike. The brand plants its logo on muscular action-movie tough guys — Vin Diesel in Fast & Furious, Dwayne Johnson in G.I. Joe. Even in I Will What I Want, the campaign pushing its women's line, the supermodel Gisele Bündchen (wife of the football player Tom Brady; both endorse UA) does not run or do aerobics the way other sports brands would have her do. They put her in a boxing ring.

I Will What I Want (winner of a Gold Lion in the Cyber category at Cannes)

Under Armour's past ad lines

• Protect the House
• I Will What I Want
• Rule Yourself
• Slay Your Next Giant
• It Comes From Below

Some of Nike's ad lines

• Just do it
• Find Your Greatness
• Unlimited
• Run and You'll Get It
• Come Out and Play

Next to the sharper UA, Nike's "Just Do It" is more like a beginner's fitness coach. By preaching that "everybody is an athlete," it grabs a far wider mass market, and its ads are full of ordinary people of every body type across a wide age range.

Take the fat boy who keeps running in the Find Your Greatness series, or 86-year-old Sister Madonna Buder in the Unlimited series, who refuses to act her age, runs marathons and competes in triathlons. It is all meant to make you feel that starting to exercise is not hard — and then you may need to buy your first set of sports gear.

Look back at Nike's early marketing and you find the two strikingly alike, down to the choice of creative agency. "Just Do It" came out of Portland's Wieden+Kennedy, once called a "creative hot shop" and treated as the model independent agency. UA's pick, Droga5, has been a hot name in recent years too, and was named independent agency of the year at this year's Cannes Lions festival.

If they have anything in common, it is a cutting style. Nike and W+K have worked together for 26 years; Droga5 and UA have only just started.

Nike ad: Unlimited Youth — Sister Madonna Buder

Signing endorsers before they break out is a small brand's way to win

For a sports brand, marketing is a competition of dollars and sponsorship deals: since 2002 Nike has spent as much as $8 billion on sports sponsorships. Last year it signed LeBron James to a lifetime contract reportedly worth more than $500 million. Many of the greatest athletes at their peak have signed some of the biggest endorsement deals in history with Nike — Jordan, Durant, Woods, Kobe Bryant, Cristiano Ronaldo, Federer. Counting only the contracts already signed, the money Nike is committed to paying athletes in the future comes to $9.4 billion.

UA takes the same athlete-first approach, but it picks its endorsers its own way: it concentrates on the U.S. market and likes signing relatively cheap college or youth-academy players with promise, choosing shrewdly inside a budget only a third the size of Nike's — often signing players before they make headlines.

The brand is known for placing bets, and luckily many of them have paid for themselves.

Stephen Curry is the most unexpected of them. College scouts wrote Curry off because of his build, and in 2013 Nike let him go, deciding he would not sell signature shoes. Today Curry is a two-time MVP, and his signature line is the biggest business in the industry after Jordan's. ESPN called it UA's "steal of the century" from Nike. In recent years Nike has paid heavily to keep a handful of stars and grown conservative about scouting new talent, which handed its rival an opening.

UA also likes to take the odd road, hunting for promising names in small fields — the ballet dancer Misty Copeland, at first called a "poor choice," is now a superstar of UA's women's business. The brand's 48 main endorsers also include hunters, trail runners, surfers and MMA fighters.

UA's careful, sharp way of using its endorsers shows up in its latest ad. In early September, UA shot a commercial for Carolina Panthers quarterback Cam Newton called It Comes From Below, and Cam Newton is the strongest card UA holds in football.

Adrienne Lofton, who worked on the creative, told Adweek that the ad came out of Cam Newton's setback: he lost the Super Bowl to the Denver Broncos this past February. In the ad, Newton runs through the woods like a panther, a figure for breaking through hardship, lying low and then rising.

"It Comes From Below" actually carries three layers of meaning. Besides the comeback, the more important one points at the new football cleats on Newton's feet. This is UA's first cleat ad, and you can also read it as a provocation aimed at Nike, the leader of the shoe market.

Had this happened to Nike and LeBron James — losing the most important final of his career — a moving Nike ad would have been out the next day. UA waited half a year, for one reason: September is when the regular football season opens, a good moment to sell the shoe.

Curry's and James's China trips show the same difference. The Curry Two made a special trip to launch in China, and Curry pushed his signature shoe hard at every stop, while James spends most of his China itinerary in college campuses and gyms.

The final showdown happens only during the Olympics

At the 2012 London Olympics, Nike's edge-skirting "Find Your Greatness" ambushed Adidas. At the Rio Olympics, Under Armour used the same method to ambush Nike.

Nike CEO Mark Parker once said: "We measure time in World Cups and Olympics." Every global event is a chance to pull away from a rival. But the organizing committee guards its sponsors' rights strictly, so brands without official sponsor status can only run the edge-skirting kind of "ambush marketing."

For a sports brand, that takes a good idea, at least one top athlete who can represent your country perfectly, and careful obedience to the committee's rules.

UA's Rule Yourself campaign, launched in August, met all three. The brand sponsored 250 Olympic athletes, among them the "Flying Fish," Michael Phelps, who went on to win 13 gold medals. The Phelps ad, released before the Games, showed him with a full beard, a face very different from the one Americans pictured. We reported earlier that the film ended up winning the Grand Prix in the film category at the Cannes Lions festival.

Adweek, the authoritative trade paper in advertising, wrote at the time: "While UA still trails Nike in revenue, some argue that UA has closed the gap through the quality of its advertising. Nike has long been known for flash and humor, while UA leans on a gritty and lived-in feeling — one that brings viewers closer to the beauty and brutality of elite sport."

But Nike is nobody's pushover. The brand's frightening reach was on full display in the issue of Sports Illustrated that came out right after the Olympics: the Nike swoosh on Phelps's trousers was plainly visible on the cover, and plenty of people on social media said it must have been awkward for his sponsor, UA.

Whether or not Nike planned it, what stands behind the moment is the brand's power. At this year's Olympics, as an official sponsor, Nike did not need to grab attention the way it did four years ago. Instead it made a thoroughly politically correct set of films around the U.S. national team, athletes with disabilities and transgender Olympians.

In fiscal 2016 Nike's revenue reached $32.37 billion, with the U.S. market accounting for nearly half of sales. At the end of last year the company said it would hit $50 billion in revenue by 2020, which makes the United States the core ground it has to defend. Nike needs to reach as many people as possible to keep growing, and in its advertising that means avoiding any values that speak for only a small group.

Nike's Olympic ad "Unlimited" ended up with 36,897,615 views, and the Phelps Rule Yourself ad with 11,260,374 — each the most-watched ad its brand has ever released. Neither attacked the other, but you can still see a head-on clash charged with gunpowder.

By size, UA still cannot be compared to Nike, but it is undoubtedly a rising rival that cannot be ignored, and Nike itself has already marked UA as its most threatening future competitor.

The Nike of the past, the UA of today, and an Adidas about to change

The sports ad that most plainly attacked a rival lately came, interestingly, from Adidas. In it, an athlete in a skull bandana taunts UA: "Look at these people training like clones — besides dull effort, sport also needs creativity." Earlier, UA had released a Rule Yourself ad in which about a hundred computer-generated copies of Curry, Spieth and Copeland swing golf clubs, dribble and dance.

Sport Needs Creators - adidas

The month that ad came out, September 2016, Adidas had just reported second-quarter results that broke its slump, with profit rising, thanks to its U.S. turnaround plan. At the end of the Adidas ad the footage flashes through football players, cleats and James Harden, a thoroughly American flavor, and the narrator says: "Sport Needs You."

The United States, the most important market for every sports brand, saw the order change in 2014: Adidas, No. 2 for years, was passed by UA and had to answer to shareholders with revenue from its trefoil sub-brand, Adidas Originals. CEO Herbert Hainer said it took him two years to "figure out how to do business in the U.S." Over the same period, UA's results grew at double-digit rates every quarter.

The path by which Adidas lost America runs exactly opposite to the order in which UA climbed. Adidas never carried its investment beyond soccer, and it was always the last to notice the women's market and digital. Even in soccer, its strongest ground, Adidas is losing its voice: its last head-on clash with Nike goes back to the World Cup in Brazil two years ago, and it is hard to say Adidas won that round — during the World Cup, two Nike ads drew 300.8 million views online.

Now the rival Adidas has to deal with first is UA. The brand has announced a more aggressive U.S. strategy, and 500 contracts with football and baseball players are laying the ground for the ad wars to come.

Look again at the "Sport Needs You" declaration, and this rebel's pose closely resembles Michael Jordan in front of Nike's camera in 1985, and Gisele Bündchen in today's UA Women ads.

The fight of a newcomer trying to take a voice away from the industry giant is common in every field: Pepsi's challenge to Coca-Cola, or the line that Avis, America's second-largest car rental company, once aimed straight at No. 1 Hertz — "We're No. 2, so we try harder!" It is a positioning strategy, and one more technique for selling products and services.

Someone is always trying to provoke the existing order of a market, and that is what makes the business world lively and interesting.

So, are you a little curious about what UA's counterattack will look like?