London -Davos, 28th January 2020 #BFGlobal500
Defending its position as the world’s most valuable brand for the third consecutive year, Amazon has broken the so far unattainable US$200 billion brand value mark, according to the latest Brand Finance Global 500 report launched at the World Economic Forum in Davos. Following 18% growth from US$187.9 billion last year, Amazon’s brand value has now reached US$220.8 billion, over US$60 billion more than Google’s and US$80 billion more than Apple’s.
The world’s largest online marketplace, Amazon has also branched out into cloud computing, artificial intelligence, consumer electronics, digital streaming, logistics, and is looking to enter other industries. With a diverse product and service portfolio, and thanks to continued investment in fast-growing sectors and innovative technologies, Amazon is not only the leader of today, but also seems primed for tomorrow.
Nevertheless, the majority of Amazon’s revenue still comes from retail, and challenges to the growth of the company’s core operations may result in brand value stagnation in the future. In November 2019, it was announced that Nike would no longer be selling its merchandise on the platform, to develop its own direct sales channels. Amazon may have to contend with other big brands following Nike’s lead, which would undermine its reputation as the ‘Everything Store’. Another potential sticking point is the future of Amazon’s international business. From environmentalist opposition in Europe, to backlash from local retailers in India, to saturation of China’s e-commerce market by Alibaba and its subsidiaries – matching globally the status that Amazon enjoys in the US, may prove difficult.
David Haigh, CEO of Brand Finance, commented:
“The disrupter of the entire retail ecosystem, the brand that boasts the highest brand value ever, Amazon continues to impress across imperishable consumer truths: value, convenience, and choice. Today, Amazon’s situation seems more than comfortable, but what will the roaring twenties hold in store?”
Samsung – Asia’s most valuable brand
Defending fifth position globally, Samsung remains the most valuable brand in Asia as its value increased by 4% to US$94.5 billion over the past year. The chaebol’s brand value depends on the performance of its various constituent parts, with the flagship Samsung Electronics having the biggest impact. The tech giant managed to beat its predicted earnings this year, largely due to the popularity of its 5G phones – as of November 2019, the company owns 54% of the global 5G market. Samsung seems set to continue this trend as it looks to develop cutting-edge technologies in the coming year, including the new foldable Samsung Galaxy Bloom phone and SelfieType invisible virtual keyboard. The success of Samsung Electronics coupled with a strategic investment in semiconductor startup, IVWorks, appears to have set the brand on a positive trajectory.
Another key subsidiary with a positive impact on the chaebol’s brand is Samsung SDS. With a current brand value of US$3.7billion, it is the 11th most valuable brand in the Brand Finance IT Services 25 ranking, up from 12th following 6.5% brand value growth since 2019. Samsung SDS recorded strong business performance with year-over-year revenue growth of 9.7%, outpacing the average IT services market growth. This success can be attributed to Samsung SDS’s ability to leverage emerging technologies to compete within the evolving IT services marketplace.
Telecoms call for help
A call to the help desk may be in order for the telecoms industry, as the majority of brands – 4 out of 5 – saw their brand value decline this year, despite strong investments. Over the past five years, the combined value of telecoms brands in the Brand Finance Global 500 has stagnated, while all other major sectors recorded significant increases. Big telcos are being squeezed from all sides as OTT messaging apps like WhatsApp are impacting voice and SMS revenue, and challenger brands offer comparable data services at below-market rates, leading to fierce price competition and decreasing margins.
US giant AT&T is the fastest-falling telecoms brand this year, down 32% to US$59.1 billion. Just like its biggest rival Verizon, AT&T finds itself outside of the top 10 most valuable brands in the world for the first time in nearly a decade. The company diversified its entertainment portfolio over the last few years, culminating with the acquisition of WarnerMedia, part of a plan to move away from reliance on the traditional telco business and pay television, as both revenue streams have been drying up. AT&T recently announced a plan to drive significant growth through 2022, including investing in strategic areas, such as 5G infrastructure enabling innovative services far above and beyond internet data.
Clearly the next big opportunity for the telecoms industry, the 5G space is inviting fierce competition, with Huawei expanding into markets traditionally covered by Western providers. Despite sparking controversy, the Chinese giant is making clear headway, and with a brand value of US$65.1 billion, now counts among the world’s top 10 most valuable brands for the first time.
Brand bubble bursting?
Looking at brand trends across all industries, the combined value of the Brand Finance Global 500 has increased by less than 2% year on year, and although 244 brands have increased their brand value, another 212 are down, including 95 by 10% or more. Those, which once enjoyed long-term success, are now needing to adjust in a world more unpredictable than ever, while many tech brands are suffering after failing to meet the bullish expectations of investors.
This is true of Chinese software giant Baidu which recorded the largest drop in brand value, down 54% to US$8.9 billion. The company reported its first quarterly loss since its initial public offering (IPO) back in 2005. Along with intense market competition, the brand’s revenues were heavily impacted as regulators placed more attention on online advertising. Baidu is now focusing on other areas to drive long-term growth, such as its cloud division, smart speakers, and even driverless cars in an effort to secure better results for the future.
In contrast, one company still very much on the road to success is Tesla, racing ahead as the fastest-growing brand with a brand value of US$12.4 billion, up 65% on last year’s valuation. The electric vehicle innovator began sales to customers in further reaches than ever before, including China, Australia, the UK, and several markets in Eastern Europe. Although there have been concerns of achieving production targets, the brand appears to be living up to its hype and is growing in value and strength.
Excitement alone, though, cannot carry a brand – it must deliver on its promise, something Uber is battling to do as its brand value dropped by one third, down 32% to US$15.3 billion, forcing it to share the ride with five fastest-falling brands in the ranking. The company went public this year but with disappointing results, closing its first day of trading with a 7.6% reduction in valuation. Uber continues to take hits, including the loss of its license to operate in London after repeated safety failures. Reminded by investors of the old adage that ‘revenue is vanity, profit is sanity, cash is reality ‘, the company is trying to get back on track and reorganised its internal structure, with a prioritisation on efficiency, profitability, and positive cashflow.
Unlike apps which have not been able to satisfy expectations, Instagram is enjoying an explosion of growth, securing the second-highest brand value increase this year, up 58% to US$26.4 billion. With more than 1 billion active monthly users and a focus on new technology, like the latest Checkout feature that benefits both consumers and other brands, Instagram is catering to demand and staying relevant.
David Haigh, CEO of Brand Finance, commented:
“Twenty years on from the dot-com bubble, as we witness global slowdown and the failure of hyped IPOs from WeWork to Uber, we may be only months away from the startup bubble bursting right in our faces. When expectation and reality do not match, the truth will out and the results can be devastating. The cost of capital is increasing, putting breaks on indefinite brand value growth, and a shift from a startup bidding war towards appraising real value is necessary.”
Ferrari in pole position again
Aside from calculating brand value, Brand Finance determines also the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. According to these criteria, Ferrari has retained its position as the world’s strongest brand for the second year in a row, with a Brand Strength Index (BSI) score of 94.1 out of 100. The iconic Italian luxury sports car manufacturer is the strongest of only 12 brands in the Brand Finance Global 500 2020 ranking to have been awarded the highest AAA+ rating.
“The embodiment of luxury, Ferrari continues to be admired and desired around the world, and its outstanding brand strength reflects this. It is no wonder that many consumers, who might never own a Ferrari car, want a bag or a watch emblazoned with the Prancing Horse, but it is also crucial that the company management remain at the steering wheel of the brand’s future and maintain its exclusive positioning by monitoring the licensing output closely.”
Note to Editors
Every year, leading independent brand valuation consultancy Brand Finance values the world’s biggest brands. The world’s 500 most valuable brands across all sectors and countries are included in the Brand Finance Global 500 2020 report.
The ranking of the world’s most valuable IT services brands, as well as a Brand Spotlight on Samsung SDS, are included in the Brand Finance IT Services 25 2020 report.
The 2020 iterations of the reports were launched at the World Economic Forum in Davos, Switzerland.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights and charts, more information about the methodology, as well as definitions of key terms are available in the reports.
Please click here for an infographic on the most valuable B2C and B2B brands by region and an infographic on the fastest-growing brands per region.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Data compiled for the Brand Finance league tables and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands. Drawing on expertise in strategy, branding, market research, visual identity, finance, tax, and intellectual property, Brand Finance helps brand owners and investors make the right decisions to maximise brand and business value.
Definition of Brand
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.