Apple has been knocked off its perch as the world’s single most valuable brand by Amazon. So says data crunched by Brand Finance, an advisory which earned a name for itself by giving a fuzzy concept the crystalline shape of a useful financial figure. This comes after a year that will be remembered for technology-sector tumbles. With big chunks lopped off what Big Tech was worth, as asset inflation caused by covid money began to reverse, could brand valuations have survived intact? Apple lost 16% of its brand value to land with a thud at $297.5 billion, while Amazon did a bit better, dropping 15% to $299.3 billion, which resulted in the top two trading places on the 2023 chart unveiled this week by the London-based consultancy. There are a few value gainers up there as well, notably third-ranked Google, fourth-placed Microsoft and most flashily Tesla, which leapt 19 ranks to the table’s ninth slot, but wipe-outs exceed gains in the tech-heavy top order put together on the basis of a formula that claims an edge in its use of openly available data. The math went by what Brand Finance calls the ‘royalty relief’ method of valuation, which is designed to answer a clear question: What would a company pay to license its brand as if it did not own it?
Would Apple Inc’s chief executive Tim Cook pay $57.6 billion less—that’s just $8.6 billion short of Tesla’s brand value—today than he would’ve done a year ago by way of ransom, say, to an AI algorithm that took its brand hostage? That’s what the latest royalty estimate suggests. So, what goes into this calculation of the money that can be charged for a brand’s use? What it takes to assess the future revenue attributable to the brand, as outlined on the consultancy’s website. This process begins with a score for ‘brand strength’ on a scale of 0-100 by means of a balanced scorecard of attributes like its emotional connect, financial performance, sustainability and so on. A range of royalty rates is then drawn for the business sector from a database of licence deals, and the brand’s strength determines where it slots (a score of 80 for a range of 0-5%, for instance, would mean a rate of 4%). After this, brand-specific revenues are noted and forecasts of it are made by treating it as a function of past sales, equity analyst projections and rates of economic growth. Next, the royalty rate found earlier is applied to these topline forecasts to derive the royalties that could—at least on paper—be charged for use of the brand. Suitably shorn of taxes and discounted to its net present value, we get a final estimate of the asset’s future rake-ins of revenue.
This measure of a brand isn’t a paragon of crystal clarity, though. It can be quibbled over. Should all sales made under a brand’s label, for example, be ascribed to its appeal? Would an iPhone by another name swipe just as sweetly? And what role does its bitten-apple logo play in the impression it forms on our minds? Apple, we must grant, is a rare brand that’s actually evocative at a semiotic level, a chunk of which can be traced to its originality. It acquired fame with a promise to make computers “for the rest of us”, portrayed the power of information for all as the nemesis of tyranny in its famed ‘1984’ ad campaign, and then went on to deliver one innovation after another. But all that’s history now. As found by a formula that shareholders probably care about, it weakened in 2022. And Cook had better whip up a recovery plan.
Download The Mint News App to get Daily Market Updates.
