London – Davos, 22nd January 2020
#BFGlobal500
Defending its position as the world’s most valuable brand for the third consecutive year, Amazon has broken the so far unattainable US$200 billion brand value mark, according to the latest Brand Finance Global 500 report launched at the World Economic Forum in Davos today. Following 18% growth from US$187.9 billion last year, Amazon’s brand value has now reached US$220.8 billion, over US$60 billion more than Google’s and US$80 billion more than Apple’s.
The world’s largest online marketplace, Amazon has also branched out into cloud computing, artificial intelligence, consumer electronics, digital streaming, logistics, and is looking to enter other industries. With a diverse product and service portfolio, and thanks to continued investment in fast-growing sectors and innovative technologies, Amazon is not only the leader of today, but also seems primed for tomorrow.
Nevertheless, the majority of Amazon’s revenue still comes from retail, and challenges to the growth of the company’s core operations may result in brand value stagnation in the future. In November 2019, it was announced that Nike would no longer be selling its merchandise on the platform, to develop its own direct sales channels. Amazon may have to contend with other big brands following Nike’s lead, which would undermine its reputation as the ‘Everything Store’. Another potential sticking point is the future of Amazon’s international business. From environmentalist opposition in Europe, to backlash from local retailers in India, to saturation of China’s e-commerce market by Alibaba and its subsidiaries – matching globally the status that Amazon enjoys in the US, may prove difficult.
“The disrupter of the entire retail ecosystem, the brand that boasts the highest brand value ever, Amazon continues to impress across imperishable consumer truths: value, convenience, and choice. Today, Amazon’s situation seems more than comfortable, but what will the roaring twenties hold in store?”
David Haigh, CEO, Brand Finance
Forty-four retail brands feature in this year’s ranking alongside Amazon, with a combined value of nearly US$800 billion, making the sector the third most valuable behind tech and banking. As the boost from the novelty of operating in the digital space fizzles out, some online retailers have started to lose brand value, while bricks and mortar chains, which have learnt to successfully adapt to the changing marketplace, are consequently making gains.
In stark contrast to Amazon’s success, eBay’s brand value has continued to erode, falling 9% to US$8.2 billion. Despite the number of active buyers steadily increasing over the last year, reaching an impressive 183 million, eBay is failing to maintain relevance in an increasingly monopolised sector. Attempts to diversify and introduce new revenue streams, through eBay Payments and promoted listings, and potential spin offs in the pipeline, could mean the brand fares better in the coming year.
In the traditional retail space, American giant Walmart (up 14% to US$77.5 billion) has seen its brand value resurge, jumping up three places and entering the top 10 once again. As well as committing to its expansion programme in key markets, Walmart has focused on an innovative digital proposition, through a partnership with Microsoft and with the launch of Alphabot – robots that pick and pack online grocery orders at high speeds.
“Despite the unprecedented disruption caused by e-commerce, the popular assertion that entering digital operations brings instant success while bricks and mortar stores are doomed for extinction is being proved wrong. As digital operators find they need to remain attentive to consumers and traditional retailers, such as Walmart, successfully adapt to change, we are back to normal as all players realise that ultimately the customer is king.”
David Haigh, CEO, Brand Finance
Mirroring the situation in retail, many traditional hoteliers are seeing significant growth this year, while brands operating in the digital space see mixed results. Hilton Hotels & Resorts remains the sector’s top brand and one of the fastest-growing brands in the ranking overall, improving its brand value 35% to US$10.8 billion, thanks to marrying experience with a clear vision for growth. Although still trailing Hilton, Marriott has also seen substantial growth over the past year, recording a 20% uptick to US$6.0 billion. Their pace of brand value growth is comparable to Airbnb’s, up 28% to US$10.5 billion, while another digital player – Booking.com – saw a 15% decline to US$10.2 billion this year.
Despite many success stories, there are also clear signs of a slowdown. The combined value of the Brand Finance Global 500 has increased by less than 2% year on year, and while 244 brands have increased their brand value, another 212 are down, including 95 by 10% or more. Those which once enjoyed long-term success are now needing to adjust in a world more unpredictable than ever, while many tech brands are suffering after failing to meet the bullish expectations of investors.
This is true of Chinese software giant Baidu which recorded the largest drop in brand value, down 54% to US$8.9 billion. The company reported its first quarterly loss since its initial public offering (IPO) back in 2005. Along with intense market competition, the brand’s revenues were heavily impacted as regulators placed more attention on online advertising. Baidu is now focusing on other areas to drive long-term growth, such as its cloud division, smart speakers, and even driverless cars in an effort to secure better results for the future.
In contrast, one company still very much on the road to success is Tesla, racing ahead as the fastest-growing brand with a brand value of US$12.4 billion, up 65% on last year’s valuation. The electric vehicle innovator began sales to customers in further reaches than ever before, including China, Australia, the UK, and several markets in Eastern Europe. Although there have been concerns of achieving production targets, the brand appears to be living up to its hype and is growing in value and strength.
Excitement alone, though, cannot carry a brand – it must deliver on its promise, something Uber is battling to do as its brand value dropped by one third, down 32% to US$15.3 billion, forcing it to share the ride with five fastest-falling brands in the ranking. The company went public this year but with disappointing results, closing its first day of trading with a 7.6% reduction in valuation. Uber continues to take hits, including the loss of its license to operate in London after repeated safety failures. Reminded by investors of the old adage that ‘revenue is vanity, profit is sanity, cash is reality ‘, the company is trying to get back on track and reorganised its internal structure, with a prioritisation on efficiency, profitability, and positive cashflow.
Unlike apps which have not been able to satisfy expectations, Instagram is enjoying an explosion of growth, securing the second-highest brand value increase this year, up 58% to US$26.4 billion. With more than 1 billion active monthly users and a focus on new technology, like the latest Checkout feature that benefits both consumers and other brands, Instagram is catering to demand and staying relevant.
“Twenty years on from the dot-com bubble, as we witness global slowdown and the failure of hyped IPOs from WeWork to Uber, we may be only months away from the startup bubble bursting right in our faces. When expectation and reality do not match, the truth will out and the results can be devastating. The cost of capital is increasing, putting breaks on indefinite brand value growth, and a shift from a startup bidding war towards appraising real value is necessary.”
David Haigh, CEO, Brand Finance
A call to the help desk may be in order for the telecoms industry, as the majority of brands – 4 out of 5 – saw their brand value decline this year, despite strong investments. Over the past five years, the combined value of telecoms brands in the Brand Finance Global 500 has stagnated, while all other major sectors recorded significant increases. Big telcos are being squeezed from all sides as OTT messaging apps like WhatsApp are impacting voice and SMS revenue, and challenger brands offer comparable data services at below-market rates, leading to fierce price competition and decreasing margins.
US giant AT&T is the fastest-falling telecoms brand this year, down 32% to US$59.1 billion. Just like its biggest rival Verizon, AT&T finds itself outside of the top 10 most valuable brands in the world for the first time in nearly a decade. The company diversified its entertainment portfolio over the last few years, culminating with the acquisition of WarnerMedia, part of a plan to move away from reliance on the traditional telco business and pay television, as both revenue streams have been drying up. AT&T recently announced a plan to drive significant growth through 2022, including investing in strategic areas, such as 5G infrastructure enabling innovative services far above and beyond internet data.
Clearly the next big opportunity for the telecoms industry, the 5G space is inviting fierce competition, with Huawei expanding into markets traditionally covered by Western providers. Despite sparking controversy, the Chinese giant is making clear headway, and with a brand value of US$65.1 billion, now counts among the world’s top 10 most valuable brands for the first time.
“It is not surprising that a number of telco brands have placed bets on new opportunities from video content rights to Internet of Things ventures. Focus on extracting as much value as possible from the declining segments cannot sustain growth in the long term, as the consumption of telecommunications has changed for good. AT&T is the perfect example of how to fight back against the shrinking of the traditional market as they lead the charge in 5G – an area ripe for expansion.”
David Haigh, CEO, Brand Finance
With a brand value of US$46.8 billion, Saudi Aramco is the most valuable among the 44 new entrants in the ranking. The publication of the Saudi Arabian oil and gas company’s financials at the time of the IPO allowed for its brand to be included in Brand Finance’s annual study for the first time. Placing 24th globally, Saudi Aramco also claims the title of the most valuable brand in the Middle East and Africa.
The IPO has proven to be successful for the brand as Saudi Aramco raised US$25.6 billion, making it the largest ever to date. Even after navigating through recent attacks on two of its oil processing sites, it is now the world’s most valuable listed company, comfortably ahead of tech titans Apple and Microsoft. Saudi Aramco is focused on leveraging its strength in upstream, while growing its downstream operations through acquisitions, both in Saudi Arabia and key global markets. The company must now focus on developing international perceptions of the brand in order to open it up further for partnerships and investment.
For the second year in a row, Ferrari, the iconic Italian luxury sports car manufacturer, has retained its position as the world’s strongest brand with a Brand Strength Index (BSI) score of 94.1 out of 100. Brand Finance determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. According to these criteria, Ferrari is the strongest of only 12 brands in the Brand Finance Global 500 2020 ranking to have been awarded the highest AAA+ rating.
Alongside revenue forecasts, brand strength is a crucial driver of brand value. As Ferrari’s brand strength maintained its rating, its brand value grew, improving 9% to US$9.1 billion. Ferrari announced five new models in 2019 and established a manufacturing agreement with the Giorgio Armani Group to help push Ferrari collections into a more premium space. For years, Ferrari has utilised merchandise to support brand awareness and diversify revenue streams, and are now taking steps to preserve the exclusivity of the brand.
“The embodiment of luxury, Ferrari continues to be admired and desired around the world, and its outstanding brand strength reflects this. It is no wonder that many consumers, who might never own a Ferrari car, want a bag or a watch emblazoned with the Prancing Horse, but it is also crucial that the company management remain at the steering wheel of the brand’s future and maintain its exclusive positioning by monitoring the licensing output closely.”
David Haigh, CEO, Brand Finance