Brand valuations need work

3 September 2014

LONDON: Apple, Google and Microsoft consistently appear in the top five of rankings of the world's most valuable brands, according to a new analysis which argues for a more consistent way of valuing brands on balance sheets.

The Daily Telegraph looked at the data produced by three consultancies – Millward Brown, Brand Finance and Interbrand – and concluded that tech giant Apple was the most valuable brand in the world, averaging $117bn, closely followed by its rival Google, worth an average $107bn.

Then came IBM on $76bn and Microsoft on $71bn. Coca-Cola, in fifth place with an average valuation of $65bn, was the only non-tech brand in the top five.

Rounding out the top ten, in order, were GE ($52.1bn), McDonald's ($51.2bn), Samsung ($48.1bn), Amazon ($44.3bn) and Toyota ($33.3bn).

The Telegraph analysis included only those companies that appeared in all three surveys, noting that, for example, that US brands AT&T, Verizon and Wells Fargo and UK brands Vodafone had not been ranked by Interbrand.

Further, a brand such as Facebook had been valued at $36bn by Millward Brown but just $8bn by Interbrand. Part of this difference could be explained by the timing of the studies, the Telegraph said, with that of Millward Brown the most recent and taking account of Facebook's estimated brand growth rate of 68%.

Another factor is the differing methodologies used by these organisations – including such things as the views of consumers, assessment of their ability to command a premium price and estimating royalties a company would have to pay to license a brand if it did not own it.

Millward Brown has also estimated that brands account for 30% of the value of companies in the S&P 500, but it was "incredible", said the Telegraph, that companies themselves were not permitted to put a value on such intangible assets.

It observed the "absurd" situation that brand valuations could emerge as part of a takeover or acquisition, but these were then "locked in" with businesses required to reveal if these fell but never permitted to increase them, "even if external agencies and common sense suggest that's what has happened".

Investors, it suggested, would welcome a clearer picture. The relatively high level of agreement among the aforementioned consultancies in valuing international brands could at least act as a check on a company's own accounting.

Data sourced from Daily Telegraph; additional content by Warc staff