When brands fail, does brand valuation too?

Last month Wally Olins, the man synonymous with the London brand agency that still bears his name, pronounced brand valuation an “utterly meaningless process”.

The bedrock on which many brand consultancies, accounting and valuation firms have built their reputations and practices, Olins pulls no punches on the value of brand valuation, describing it as “about as meaningful as sticking your wet finger in the wind and shouting out a number.”

He says this “ apparently rational process” is conducted through a “series of complex, arcane and to a lay mind more or less incomprehensible statistical measurements” but which ignores a number of well known truths.

“The truth is that brands of all kinds jump around all the time. They are in fashion, then they go out of fashion. They are well managed, then they are badly managed; brand managers become too risk averse or take too many risks.”

And his point is well made. Here in Australia we only need to look at a company like Babcock and Brown (B&B). Founded in 1977, this international finance and investment company had at one time 28 offices and in excess of 1,500 employees worldwide including offices in Europe and the United States. In December 2006 it had a market capitalisation of just over $8.5 billion and in 2007 its share price peaked at AU$33.90 but by December 2008 its share price had nose-dived by 99.6% to AU$0.14, representing a market capitalisation of less than $50 million. Last week the company was placed into voluntary administration.

Here Olins’ point is easy to support. Obviously, if a brand like B&B has no financial value (as the B&B board announced in January) - on what basis can any brand valuation be made?

Similarly, as BusinessWeek ranked Citibank the number 11 brand in the world in 2007 with a valuation of U$23 billion by 2009 some estimates put its brand value at around $9 billion and with that its ranking would fall to around number 40. No one can or would dare predict what Citibank’s brand value will be by the end of 2009. And given the level of US government assistance (US$25 billion to date), it’s brand may yet cease to exist (like I saw Washington Mutual close it’s doors and disappear overnight) and what then is the meaning of any valuation?

It Olins is does oversimplify of the brand valuation process in that it does examine both net present value as well as attempts to construct an idea of future value. However, he is right about how often brand valuation is trumpetted as an absolute measure of value and that, almost without exception in most valuations I have seen, the process takes no account of what either customer or market perception and sentiments is for a brand.

And Olins is only half right when he says brands have “no objective, absolute value” but the truth is that brand valuation can be used to establish an objective value but its ability to measure “absolute” value that is somewhat questionable.

The four standard brand valuation methodologies accepted by both the Financial and Accounting Standards Board and the International Accounting Standards Board for use on balance sheets around the world do provide an objective guide to what people should pay for brands. However, they can, in no way, be used to demonstrate absoluteness

The real fact is that by any measure there has only been a small reduction in the brand value of most of the world’s top brands and as market conditions and sentiments change values continue to change. Last week brands like Apple, Google, UPS and Amgen were being touted as possible replacements in the venerable Dow Jones Industrial Average for stricken companies like Citi Group, General Motors and General Electric.

Brand values do reflect balance sheets, market trends and sentiment but can only do their best to take account of black swan moments. In that way there can be no absolutes, and that is meaningless.

This blog was also cross-posted in Marketing Magazine Australia on March 17.

Return on influence: metrics and measurement for brands in social media.

One of the emerging dynamics of social media is the compelling need for companies and organisations interested in tracking their brand, positioning, reputation and saliency within this space is to have some way of measuring return on both investment and influence.

Many organisations want to be able to measure their involvement or even assess potential returns prior to investment but are slowly coming to the realisation that traditional web-based analytics alone are not going to do the job, so the next question is crucial – what and how should be measured?

The crux of the issue is that regardless of the success of brand monitoring companies like Neilsen BuzzMetrics and TNS Media Intelligence/Cymfony, at this point in history their work is both highly speculative and also completely unique to the interpretation of the entity doing the measuring.

While the ability to track the tone, perception and nuances of discussions around a company and its brands, either via social media or even within it, cannot be achieved through web metrics or traditional advertisement measurement alone, the real problem is that even among the eight or so market leaders Forrester Research identified last year, there is no universally agreed standard upon which to base either measurement and metrics.

Certainly, the measurement attributes identified by Factiva, one of the vendors included in the Forrester study, could likely be considered to be part of any brand monitoring mix but this mix is also likely to be far more dynamic than anticipated.

Last year Factiva tried to get an understanding of the prevailing thinking, hosting a roundtable of influential bloggers and social media critics which identified the following measurement attributes (I've left out explanations of those that need no explanation):

1. Analytics and activity

2. Community activation/call to action

3. The "Conversation Index", define as the ratio between blog posts and comments-plus-trackbacks. This attribute is one subset of measuring participation and engagement but when I look at the majority of external corporate blogs alongside trackbacks and comments even in our brand sector, the actual ratio is low.

4. Demographic/s

5. Influential ideas or memes which the "intensity" or "velocity" of the spread of an idea or message over time. (A "meme" refers to an idea or discussion that grows and spreads from individual to individual into a lengthy chain of commentary. Rather like an idea train.)

6. Participation and engagement, where a recipient not only responds to a message but acts on it as well.

7. Reach, where it’s a lot less to do with sheer numbers than with influence.

8. Relationships and connections. For example, Factiva’s panel noted that a blogger may have a large, diverse audience but he or she may not have an intimate relationship with specific influential individuals within any given community.

9. Relevance, the question being how relevant to my company is a particular blog post among hundreds of a given meme?

10. Sentiment/tone/favourability

11. Content: the focus of coverage of social media. In most cases, this means a narrow, but extremely detailed focus on one subject or issue and it explains the importance of certain blogs over others within their respective niches.

Factiva’s panel concluded that to be successful companies need to use a combination of several key measurement attributes to understand and drive their own social media success for internal and external stakeholders.

Brand monitoring companies need to be able to help clients develop and execute plans which monitor and measure these changing attributes within a specific context and within a sphere of operations. Brand agencies then need to able to be bipartisan and develop strategy that acknowledges both measurement and metrics are dynamic and that a company's ability to identify those key attributes important to it might actually be limited. Setting these against a wider brand context and against other metrics might be another way of helping to define their brand influence.

Can Facebook get social advertising right?

Facebook is ratcheting up social commerce and wants to turn every member into a promoter for advertisers.

The New York Times reported overnight that Facebook founder Mark Zuckerberg announced the site would now feature what it describes as “social ads.”

On September 24 the company filed in the US to protect the trademark “SocialAds” in relation to “advertising and information distribution services, namely, providing advertising space via the global computer network”.

The new feature will be included in the news feed section of individual profiles and will enable advertisers to create their own profile pages and that will will let users identify themselves as fans of a particular product or service. For example, it might be that I might identify myself with Apple and so a newsfeed would be produced that says "Stephen Byrne is a fan of Apple". This message may also be featured in banner advertising which may include my picture or in single line text advertising that often runs as you load applications.

Facebook says it will initially offer social ads to advertisers for free but would continue to charge for banner advertising which could run with the endorsements.

“Nothing influences a person more than the recommendation of a trusted friend,” said Zuckerberg.

Facebook is also going allow advertisers to tap into the vast stores of data that its users provide, allowing advertisers to target users along geo, socio, demographic and psychographic.

In Australia Facebook has just over 1 million users (I checked) and is growing fast. Zukerberg was quoted as claiming it had 50 million global users with 25 million users visiting Facebook each day. It loads 65 billion pages on which advertisements can be displayed each month.

Zuckerberg is short on any projected ROI or effective measures of both the existing advertising and the proposed social ads but on the back of the recent $240m Microsoft investment, it's a direct threat to Google's highly successful AdSense network and surely competitor MySpace won't be far behind in developing a similar offer.

What's clear is that, as I noted in the previous DIFFUSIOBlog Intrusion vs seclusion, the move represents a new phase in the development of social exchanges. It will be interesting to see whether Facebook users will embrace it or whether it will be shunned.