The experts have spoken and I’m astounded.
The valuation and ranking of the 75 most valuable global brands for 2013, as separately determined by the top three brand consulting agencies active in the promotion of brand valuation services, reveals a mind-boggling variance.While all three agencies agree that Apple is the world’s most valuable brand, their valuations span a range of $98 billion. This is not an anomaly. Each agency had its own list of its top seventy-five resulting in a total of 136 brands being represented on the three lists. Of the brands that did make multiple lists, the agencies disagreed on the ranking and valuation of every single one. Google, Amazon, and Facebook are three examples:
- Google is ranked 2nd or 3rd and its valuations span a range of $61 billion.
- Amazon is ranked 19th, 8th, or 14th and its valuations span a range of $22 billion.
- Facebook is ranked 52nd and 31st by two of the agencies and doesn’t make the list of the most valuable 75 global brands for the third. Its valuation by these two agencies differs by $13.5 billion.
Why is this important?
Brand consulting agencies active in the promotion of brand valuation services claim that these services provide a panacea for resolving the tension that exists between the CMO and CFO about how marketing investments can be linked with the bottom line results for a business. The enormity of the discrepancies between the findings of these three agencies doesn’t help to make their case very well. It might even make one a little skeptical.
Why does this gap exist?
A number of important factors may account for these discrepancies:
- As it is not a balance sheet item, there is currently not a standard system for determining brand value.
- Although the International Organization for Standardization (ISO) set its own standards for valuation in 2010, and the Marketing Accountability Standards Board (MASB) has launched a project to create such a standard, the question of the consistency that will be achieved between the standards established by these two organizations remains uncertain.
- As every brand consulting agency regards the “black-box” at the heart of its brand valuation methodology as core intellectual property and a key factor in distinguishing its practice from competitors, the compliance of these agencies with these standards remains uncertain. (Interbrand, Brand Finance, MillwardBrown)
- Perhaps most importantly, the construction and application of brand valuation methodologies allows for a great deal of subjectivity by practitioners. How else is it possible to explain the discrepancies between the valuations of those brands included by both Interbrand and Brand Finance in their rankings of the most valuable 75 global brands given that each is ISO certified?
So, while some discrepancy in the brand valuations and rankings should not be surprising, the mind-boggling size of the discrepancies in the work of these brand consulting agencies is astounding.
Taken together, the above factors alone suggest that brand valuation is far from the panacea it’s claimed to be for resolving tensions between the CMO and CFO. The question of how marketing investments contribute to the bottom line by building the value of the brand may not be easily answered for some time to come.
I’m a little skeptical. Have a look at the data and let me know what you think.
To view FULL SIZE, click the LINK and the magnifying glass
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Ashley – a critical discussion to have and you’re right to highlight such a significant variance. My ignorant question – why has it taken so long to get established standards of measurement for such a key business asset? Sarbannes-Oxley was written into law months after the last financial meltdown…why can’t we get to a common methodology for brand valuation?
Ashley, Hilton, I have long been a skeptic of these brand valuation models. There is a fundamental conflict of interest at the core of each: they are designed by firms who compete with each other for brand consulting business, and are therefore compelled to create proprietary metrics in order to differentiate themselves. It’s a ‘my model works better than yours’ scenario in which there seems to be no impartial authority to determine which is most accurate.
While it’s not unusual for firms to create proprietary tools, when it comes to brand ‘math’, there should be, as Hilton notes, a universally applied calculation. I would speculate that the reason it is not something that has been as quickly deployed as Sarbannes-Oxley is because it isn’t perceived as a financial practice that poses any threat to the global economy. If these models disappeared tomorrow I’m pretty sure it would be business as usual.
Hello Hilton and Will, my thanks for taking the time to comment. I’ve added a link to make it easier to read my analysis in FULL SIZE. It really is astounding!