Clearer innovation pipeline helps boost brand value as Apple pays for secrecy
Google has regained its position at the top of the table in the 2016 BrandZTM Top 100 Most Valuable Global Brands ranking, released today by WPP and Millward Brown overtaking Apple on the back of a 32% increase to hit its best-ever brand value of $229.2 billion. Apple stands at £228.5 billion, down 8% from its 2015 value.
Google has thrived thanks to continual innovation, increased revenue from advertising, and growth in its cloud business.
By contrast, Apple tends to follow a trend of bi-annual surges of innovation along with keeping this pipeline secret. This, combined with the lost momentum in sales for the Apple Watch as well as the lack of a new market-defining handset, is reflected in the 2016 valuation for last year’s no.1.
For the second consecutive year, Facebook was the technology brand that rose the fastest in the BrandZ Top 100, growing 44% to $102.6 billion, a value that pushed it into the top ten for the first time. This was thanks to adding new features such as Friends’ Day, Disaster Alert and live video broadcast to its community platform, as well as attracting new publisher content. It is also proving highly successfully in monetizing the move to mobile, attracting significant spend via its mobile ad platforms.
Overall, however, it’s been a less than triumphant year for the tech sector. After 2015’s 24% rise in total value for the Top 20 tech brands, 2016 has seen just a 6% rise. As a rule, hardware companies have performed less well with new areas such as wearables, watches and the internet of things yet to deliver either financial or brand benefits.
One company that has defied the hardware-service divide is Huawei, the low-cost smartphone manufacturer, which first entered the tech Top 20 last year. It has shown 22% growth to $18.7 billion following its emergence as the leading Chinese smartphone maker in China, and becoming a key rival for Apple in the rest of the world. This market leadership also allows Huawei to strengthen its premium position by raising prices.
Another success story that is indicative of future trends is streaming TV service Netflix. It has been listed in the tech Top 20 for the first time with a brand value of $9.2bn.
That consumer perception that the B2B brands are less innovative – even if that isn’t always the case – has seen the proportion of total value in the technology Top 20 that is contributed by B2B brands decline from 56% in 2006 to just 26% in this year’s listing.
“There is a clear imperative for tech brands to showcase their innovation pipeline both in order to convince consumers that they are working hard to change their consumers’ lives but also to allow investors to anticipate future growth more accurately. With complex supply chains, secrecy is no longer possible and Google has benefited from its corporate restructure which allows it to better showcase the innovations beyond its core search business,” said Elspeth Cheung, Global BrandZ Valuation Director at Millward Brown.
The BrandZ study also identified multiple areas for short-term growth including Virtual Reality, where mass market affordable devices were launched to huge acclaim earlier this year, as well as developing markets, where Facebook and Twitter are desperate to establish themselves. While the luxury end has already been grabbed by the likes of Apple and Samsung, the huge number of newly wealthy consumers remains a big opportunity.
Summary of the main global stories:
· Disruption is a catalyst for value growth. The categories that increased in value were all either shaken up by challenger brands founded on a unique and meaningful proposition, such as Under Armour and Victoria’s Secret in the apparel category (+14%), or innovated to a high degree in response to a new trend, such as the brands in the fast food category (+11%) which successfully responded to global demand for healthier products.
· Innovation is the main growth driver – but it must be seen and felt by consumers. The brands that are the strongest innovators have increased their value the most over the 11 years of BrandZ Top 100 rankings. However, to have an impact on brand value, innovation must be clearly communicated and delivered through the brand experience: the brands that are perceived as innovative by consumers – which include Disney (no.19) and Pampers (no.37) – grew nine times faster than those seen as less innovative.
· Strong emotional connections are boosting local brands. With a clear understanding of their consumers’ needs, local brands are gaining market share at home and, with improved functionality and marketing, are also winning share in new regions. China’s Huawei (no.50, +22%), for example, has rapidly globalised and taken market share from both Apple and Samsung.
· Apparel is the fastest growing category, rising 14% to $114bn. There is an emphasis on high performance, with brands including Nike (+26%) and Under Armour (a new entry) launching specialist premium lines, incorporating technology such as heart monitors into their clothing, and integrating sportswear with free apps to provide a total consumer experience.
· B2B is a category of efficient businesses but inefficient brands. They are perceived as more responsible than B2C brands, better to work for, good value and stable, but not as exciting or dynamic. B2B brands are in fact highly innovative; ensuring they are credited as such requires strong and meaningful brand communication. SAP (no.22) and Adobe (a new entry at no.100) are among the B2B brands being perceived as innovative by customers.
About the BrandZ™ Top 100 Most Valuable Global Brands Ranking
Carried out by WPP's marketing and brand consultancy Millward Brown, the BrandZ™ Top 100 Most Valuable Global Brands ranking is now in its eleventh year. It is the only study to combine measures of brand equity based on interviews with over three million consumers globally about thousands of global ‘consumer facing’ and business-to-business brands with a rigorous analysis of the financial and business performance of each company (using data from Bloomberg and Kantar Worldpanel) to separate the value that brand plays in driving business and shareholder value. Consumer perception of a brand is a key input in determining brand value because brands are a combination of business performance, product delivery, clarity of positioning, and leadership. The ranking takes into account regional variations since, even for truly global brands, measures of brand contribution might differ substantially across countries.
About Millward Brown
Millward Brown is a leading global research agency specializing in advertising effectiveness, strategic communication, media and brand equity research. Millward Brown helps clients grow great brands through comprehensive research-based qualitative and quantitative solutions. Specialist global practices include a leading Digital practice (focused on digital effectiveness), Firefly Millward Brown (a global qualitative network), a Neuroscience Practice (using neuroscience to optimize the value of traditional research techniques), and Millward Brown Vermeer (a strategy consultancy helping companies maximize financial returns on brand and marketing investments). Millward Brown operates in more than 55 countries and is part of Kantar, WPP’s data investment management division. Learn more at www.millwardbrown.com.
About WPP
WPP is the world’s largest communications services group with billings of US$73 billion and revenues of US$19 billion. Through its operating companies, the Group provides a comprehensive range of advertising and marketing services including advertising & media investment management; data investment management; public relations & public affairs; branding & identity; healthcare communications; direct, digital, promotion & relationship marketing and specialist communications. The company employs 194,000 people (including associates and investments) in over 3,000 offices across 112 countries. For more information, visit www.wpp.com. WPP was named Holding Company of the Year at the 2015 Cannes Lions International Festival of Creativity for the fifth year running. WPP was also named, for the fifth consecutive year, the World's Most Effective Holding Company in the 2016 Effie Effectiveness Index, which recognizes the effectiveness of marketing communications. In 2016 WPP was recognised by Warc 100 as the World’s Top Holding Company (second year running).