What are brands worth? In short, probably not what Millward Brown thinks they are.
Lenna Rao writes today in TechCrunch about the new BrandZ study from Millward Brown, the purpose of which is to list the 100 most valuable brands. You can get a complete copy of the report here. Or if you just want an overview including Cristiana Pearson’s video explanation the methodology Millward Brown used, try this link.
I listened carefully to Ms. Pearson’s explanation of how they slice and dice the numbers to come up with what a brand is worth, nevertheless I can’t help thinking that the $100 billion figure assigned to Google, the the number one ranked company in the study is just a bit too–what’s the word?–perfect. And yes, I know Millward Brown says their methodology isolates the value of a specific brand from the other assets and brands held by a company, excludes a number of other extraneous factors, etc., but how accurate can that process be in our incredibly interconnected world? Let’s just say coming up with an answer of precisely $100 billion didn’t help persuade me that they’d gotten it right.
I’m kind of old fashioned about questions like what’s something worth. Say what you want about the market, but it does a pretty good job of measuring these things with a number called market capitalization. You know what something is worth? It’s worth what people are willing to pay for it, which is precisely what market capitalization measures.
Today Google’s market cap is $124.83 billion–almost $25 billion more than BrandZ credits them with. Microsoft, on the other hand has a market cap of $180.12 billion, which BrandZ says they’re worth a paltry $76.2 billion–a difference of $104 billion dollars, which is a lot even in TARP money. McDonald’s market cap is $59.43 million; BrandZ gives them credit for $66.6 billion. You can easily do more comparisons yourself if you so desire.
The bottom line is this. At its highest level, advertising isn’t really about selling products, despite what all the copywriters, art directors, AEs and producers may think. It’s about driving shareholder value. In other words, it’s about increasing the market capitalization of a company. Those are the conversations that agency presidents are (or should be) having with their C-level clients. That Millward Brown has strayed so far from this very simple metric tells me that their BrandZ study is too clever by half.