Brand counts for a lot in today’s business world, but it can be difficult to quantify. Yet this is what Brand Finance has done, publishing its Global 500 ranking of the world’s most valuable brands. According to the Brand Finance Global 500 report, Amazon is the world’s most valuable brand, valued at a staggering $150 billion.
What are the world’s most valuable brands?
Amazon is considered to be the world’s biggest internet business by both market capitalisation and revenue. It is no longer just an online retailer but more crucially provides cloud infrastructure and electronics. It is moving beyond the digital space, acquiring Whole Foods last year for $13 billion, a move which takes Amazon into the world of bricks and mortar.
“Jeff Bezos once said that brands are more important online than they are in the physical world,” says David Haigh, CEO of Brand Finance. “He has proved himself right by choosing the name Amazon, known as the largest, most powerful river in the world, as 23 years later the Amazon brand carries all before it as an unstoppable force. The strength and value of the Amazon brand gives its stakeholder permission to extend relentlessly into new sectors and geographies.”
Second place in the ranking of most valuable brands is Apple, but its brand value growth last year was only 10%, according to Brand Finance, versus 42% for Amazon. Brand Finance thinks Apple’s future “looks bleak.” Apple has failed to diversify and grown over-dependent on the sales of its flagship iPhones, which are responsible for two thirds of its revenue. It also saw poor Q4 sales of iPhone X at only 29 million handsets, well short of expectations. With the advent of emerging world brands like Huawei, Apple’s increasing focus on what are effectively luxury products may cost the brand a fair share of the global mass market, limiting the potential for brand value growth.
Technology is dominating in the valuable brand stakes
Technology companies occupy all five top spots in the study of 500 leading global brands, for the first time since the inception of the study. AT&T has dropped to sixth place. It illustrates the increasing dominance of technology firms in our day to day lives. Brand Finance has conducted a useful study here – the firm says it expects that digital brands is set to grow even more in the coming years – for example YouTube, which is part of the Google empire, has doubled its brand value in 2017.
But of most interest is the growth of the value of Chinese brands. One of the arguments we have made historically against investing in China is the lack of world class brands that are able to go out and compete on equal terms in the international market. Since 2008 China’s share of global brand value has increased from 3% to 15%. Chinese companies are becoming more focused on the development of their brands, at least domestically. China has been pursuing a dual strategy of building home grown brands but also acquiring under-performing international brands like Volvo and Pirelli.
The Armchair Trader says:
The value of a company’s brand is an important part of a firm’s overall market value, but it is rarely quantified by market analysts, who focus on cash flow, debt, and tangible assets. A brand is notoriously difficult to value, but name recognition is a critical part of a company’s overall success. The growth of Chinese brands that are able to compete on their own terms internationally will be a big theme for investors in the next decade. Pay particular attention to the likes of Huawei and Ping An.