Brand names are worthless

We often read about the value of brand names: “The ikea brand alone is worth $12 billion – Interbrand”

Not really. The value of a brand is the infrastructure and value chain which has been built behind it, resulting in the ultimate revenue streams. In truth the brand name is worth very little. Think about many of the unexpected and surprising corporate failures. Lehman Brothers, Ansett Airlines and Worldcom to name a few. What are their brand names worth today? Zilch.

If the brand name was really worth something, they would be sold and re-launched in some capacity. When any company is bought, the brand name is merely an adendum. It’s not the name that is being bought, rather the system, the structure, actually it’s the organisation. Of which the brand name is a very small part, even though it is what is spruked as the compenant of ultiamte value.

Startups who want to build a brand should think less about names and logos and more about building an infrastructure and revenue streams.

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20 thoughts on “Brand names are worthless

  1. Agree but once a business is up and running, a strong brand is what can determine someone knocking on your door first as opposed to looking elsewhere. Now without the backend they may not buy or if they buy they may not stay for long, but building a brand has value.

  2. A brand is realised with brand elements (eg. trademarks, logo and domain name). These do have value.

    For example, if eBay went bust tomorrow, and someone offered you the name and trademarks, without any code, staff or hardware, for $1,000, you would buy it right? If it was $10,000, you’d probably still buy it. Possibly for $100k or $1 milliion. And it would be worth it. Same for Google. Same for Facebook.

    Worldcom and Ansett the value was the in the infrastructure. I may have been too young to remember, but I don’t recall them having very valuable brands. For them, it was all about the business itself.

  3. I do agree a startup’s focus should be on the business though, not the brand. A brand is worthless if there never has been a great business behind it.

  4. Dude, I couldn’t agree more. And it’s funny because I found a great case study in this mornings paper.

    Toyota, who recently recalled a lot of cars (especially the Prius – http://www.nytimes.com/2010/02/05/business/global/05toyota.html) were thought to be gonners when it came to brand value. The CEO, a family member of the first Toyota’s, even came out and apologised for everything.

    The kicker? In todays SMH, there is an article that points out that Toyota is STILL the top selling car maker in Australia for the month of February, 2010.

    (http://smh.drive.com.au/toyotas-brake-crisis-not-stopping-sales-20100303-pj3u.html)

    So in a month were the company was found to make a product with faulty brakes (which are pretty important in a car) this same company outsold the next best by almost double!

    And why? Because, I think, we fundamentally trust the Toyota infrastructure and operations far more than just the name on the bonnet. Sure, they stuffed up. But I think we kind of figure this thing happens every so often in every business (heck, ours included!) and so we fall back and trust that they will get the problem solved.

  5. Interesting post, not sure I agree though…

    Surely both brand and infrastructure are important to varying degrees depending on the stage at which the business is at, whether established or starting up. Great infrastructure is crucial for certain types of businesses but a good brand is needed to give that infrastructure (and it’s reputation) a face and to make it memorable.

    The two go hand in hand and I don’t think you can say a brand isn’t important. A brand is far more than a logo and a name, to me a brand is how a business or organisation is perceived and that includes how you present yourself in every aspect in what you do – from answering the phone, addressing complaints and ultimately how you run your business. So I would argue that infrastructure IS part of the brand…

    thoughts?

  6. It would on;y be for sale (the name / word) If they (A) changed their name, or (B) went out of business, I wouldn’t buy it for $1000.

    Here’s why:

    (A) There would be an awareness campaign to redirect consumers. Because they can afford it and have the financial and business infrastructure in place.
    (B) If they went out of business, it wouldn’t be worth much due to the negative connotations & associations with the failure.

    The word and name means little when out of context, or without the structure that supports it.

    Steve.

  7. Hey Steve, perhaps I should clarify my view a little…to me a distinction needs to be made between what a ‘brand’ is and what ‘brand names’ and ‘brand identity’ are. With this in mind I do not think that name and logo mean little as they put a face to the business value you refer to…

  8. Haha that’s unfair, both of those scenarios destory the value in the name. There are more scenarios where the name could be for sale. 🙂

    Consider option (C). You are working for a hedge fund who want to acquire a successful eBay.

    eBay gives you two options. “You can have all infrastructure for price X, or you can have all infrastructure plus the trademarked name for price X + $1,000”.

    Would you buy the name too? If the name is worthless, you wouldn’t. But that’s just crazy. The infrastructure is worth much less if used with the name “Yet Another Auction Site”.

    I agree with your statement “The word and name means little when out of context”.
    But that doesn’t mean “the word and name are worthless”.

  9. Agreed. Simple and sweet. I’m also surprised at how strange, unrelated or very simple names tend to not matter if the whole company represents and delivers well. Note to business startups. Stop fluffing around for 2 months on a name and logo etc. Build a good company and you can be called something simple and boring like “Myers” “Coles” or “Amazon”.

  10. Brands don’t rise because of a name or a logo. Nike is not successful because of its name, but for the lifestyle it represents. Apple is not successful because of the name, or the damn apple, but because they offer attractive design. Sure, it’s cool to have a name that people recognize. Sure, it’s cool to have a logo that attracts people to look at your business. But if your business sucks, none of that matters.

  11. This partially an exercise in semantics.

    Are brandnames important?

    Um, sort of. The choice of name is fairly arbitrary clearly. But once chosen and once reflective of a reputation it becomes valuable.

    If they were auctioning off random (and currently unused/unassociated) words in a market none would carry much inherent value. I guess conceivably the more aesthetically pleasing, rhyming and punnable would have marginally higher appeal.

    Brandnames only become of interest/value once backed up by something that’s of value (i.e. a product people want, a sturcture to support delivery of said product) – which is Steve’s point.

    Asking afterwards whether you’d buy a brand (but nothing else of the firm) is pretty redundant. Few such instances ever arise for exactly the reasons folks are discussing – because everyone – other firms, customers etc – know that the name does not equal the product, the process etc…

  12. Really? I’d say if a business collapses the brand value collapses with it – but when the brand is strong it is worth a huge amount. The function of the infrastructure is what fundamentally gives you trust in the brand – that doesn’t mean the brand is worthless though. The brand is the link to the reputation.

  13. Steve,
    I’ve recently been following you and generally agree with your thoughts, but I must say, I’m very surprised with this post. Didn’t you recently write:

    ‘Brand: A cognitive shortcut from which to make informed decisions.’

    I agree with your definition. The cognitive short-cut is comprised of many many touch points including, but not limited to, the brand, the logo, the product, the design, the customer service, the accessibility, the PR, the advertising, and arguably most important, your personal experiences with that brand. The logo is one small part of the marketing equation, but it’s definitely not to be disregarded. It’s your company’s first impression and we all know what they say about first impressions. How many people will buy a pair of short from a crowded rack of brands just because of the Nike swoosh?

    What’s one of the most important things to remember in marketing: the best products don’t always win, the best products with the best marketing win. Example, Snuggie vs. Slanket. Most people don’t know that the slanket was around years before the snuggie and they are essentially the exact same product. But snuggie invested in airtime and a tongue and cheek infomercial and that’s all she wrote.

    Right now, Ebay owns the concept of ‘online auction’ in peoples’ mind, and you better believe that I would buy that brand name/logo/and domain for $1000 bucks without any of the infrastructure! I can pull together $100,000 of investment, and a team and I can recreate ebay in it’s entirety in several months, but I may never be able to build another online auction company, no matter how good it is, that is better associated with online auctions.

    Coke, Budweiser, GE, Google, Microsoft, Apple. Some of the greatest brands of our time. The mere mention of their name without so much of a logo, can invoke a rush of associations in a consumer’s mind. And not just associations, but a clarity of associations. If you google and bing a term – each search engine will now return similar results. Walt from WSJ actually said that Bing has some nice features that Google does not – which brand will you bet on??

    A classic that every market should read and reread every year: The 22 Immutable Laws of Marketing: Violate Them at Your Own Risk!

    http://www.amazon.com/22-Immutable-Laws-Marketing-Violate/dp/0887306667/ref=sr_1_1?ie=UTF8&s=books&qid=1267996604&sr=8-1

    Steve, anyone can build your site and revenue stream in a matter of months, but it’s your brand they must contend with.

  14. Great response and comment. The blog entry was written with controversy in mind to make the point that the value of the name, is the result of the infrastructure which is built.

    Steve.

  15. I agree to the authors opinions. However, we should leave clear that what your brand and brand logo transmit to your audience is important, so make sure you get the right advices to go about that the best way.

    Creating goodwill around your business is what will make it valuable. How customers feel when they go to your business and when they recommend you to others is what make any business increase its value, and not exactly its brand.

    I recommend readers on this article to join the conversations on Startups.com Q&A for further advices.

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