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Brand value in the time of COVID-19

Brand value in the time of COVID-19

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Software brands are expected to lose up to 10% of their brand value as a result of COVID-19, according to the latest Brand Finance Tech 100 2020 rankings. Among the list of software brands feature include Google, Microsoft, Oracle, SAP, Salesforce, Adobe, and Baidu.

Google was ranked the most valuable software brand and the second most valuable overall with a brand value of US$159.7 billion. According to the report, COVID-19 is “likely to split Google’s fortunes down the middle” with Google Cloud predicted to celebrate boosted demand, as remote working becomes widespread.

On the other hand, the pandemic poses “a major threat” to its advertising business, where majority of the brand’s revenue comes from, and this will inevitably slow down.

According to Google’s recent financials, YouTube ads amassed US$4.04 billion in revenue compared to US$3.03 billion during the same period in 2019, while Google Advertising saw a revenue of US33.76 billion compared to US$30.59 billion last year. Alphabet CEO Sundar Pichai said the first two months of the quarter were strong for its advertising business. However, the company experienced "a significant and sudden slowdown" in ad revenues in March, correlated to the locations and sectors impacted by the virus and related shutdown orders. 

brand finance tech sector brand value 3

Meanwhile, Microsoft was the second most valuable software brand and fourth most valuable overall with a brand value of US$117.1 billion. Oracle, SAP, Adobe and Baidu rounded up the top six most valuable software brands.

For Baidu in particular, Brand Finance said it recorded “the largest drop in brand value in ranking”, dipping by 54% to US$8.9 billion. Combined with intense market competition, its revenues were severely impacted as regulators placed more attention on online advertising. According to the report, Baidu currently 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. The combination of the economic slowdown in China and COVID-19’s damage to ad sales, will no doubt cause some damage to ad-dependent brands like Baidu, the report explained.

Electronics to also take a 10% hit in brand value

Like the software sub sector, the electronics sub sector is likely to be moderately impacted by the pandemic, with a potential 10% loss of brand value at stake. Leading the way is Apple which posted a 9% drop in brand value to US$140.5 billion, the report said, and simultaneously dropping to third spot in the ranking.

According to Brand Finance,

Apple has struggled to grow in key emerging markets, showing little motivation to diversify its portfolio. 

Brand Finance’s analysis showed that Apple could lose up to 20% of its brand value following the pandemic with supply chains broken and consumer spending slowing - the brand will be hoping the return to normality in China could offset some of this damage.  On the other hand, Chinese electronics company ZTE saw a 37% brand value growth which was bolstered by its increased adoption of 5G. It was ranked 25th in this sub sector. Brand Finance explained that telco equipment brands should be in a solid position to experience good growth as the rise of 5G accelerates worldwide. Other brands that made the top six ranking for this sub sector include Samsung, Huawei, Cisco, Sony, and Midea.

Retail brand value to jump

Ecommerce brands have the opportunity to thrive in the current climate as demand for this platform increases exponentially. Retail is the only sub sector to increase in brand value as a result of the pandemic, Brand Finance said, up to 20%. Using Amazon as an example, which topped the rankings overall, the report said Amazon “is set for continued growth” and it has been benefitting from the unprecedented demand growth as consumers turn to online after store closures. Meanwhile, Japan’s Rakuten was ranked the fastest growing retail brand, with a 66% brand value growth to US$5.2 billion. Other retail brands that made the ranking included Taobao, Tmall, Alibaba, JD, and eBay.

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Media and games to suffer limited impact

This sub sector is expected to witness a 0% change in brand value as a result of the pandemic. The report said that while Facebook's brand value slipped to 4% to US$79.8 billion due to high profile reputational issues such as Cambridge Analytica, the pandemic "could turn the tide on the tarnished brand". This is because consumers are made to keep in touch with friends through social media. Facebook has also been trying to prove itself useful in this current situation, by developing a symptobusiness tool -  beyond its traditional influencer market - as more businesses move online during lockdown.

In line with positive trends in brand value among other video streaming services, last year also saw Netflix enjoy an 8% boost in brand value to US$22.9 billion. Netflix's success of changing consumers' viewing habits has only been spurred on by COVID-19, the report explained, with the timely release of Tiger King raking in 34 million US viewers in the first 10 days alone.

Overall, Brand Finance's director Alex Haigh said the sheer size and diversification of the tech sector undoubtedly means that brands are going to be affected differently from COVID-19.

"On the one hand, eCommerce brands are likely to see a boost to their brand values following record high demand. In contrast, other tech brands’ journeys in the coming year could be more turbulent, with supply chains impacted, consumer spending shifting and slowing demand impacting brands’ bottom lines and, in turn, their brand values," he said.

Biggest companies set to lose US$1 trillion in brand value

The COVID-19 pandemic is set to cost the biggest companies worldwide a loss of approximately US$1 trillion in brand value, with the aviation sector being the most affected. Based on the severity of enterprise value loss observed for the sectors between January and March this year, Brand Finance classified the sectors into three categories - limited impact (-0%), moderate impact (-10%) and high impact (-20%). 

Sectors such as household products, telecommunications, pharmaceuticals, cosmetics and personal care were among those predicted to witness limited impact. Meanwhile, tech, healthcare, automobile, and logistics were among the sectors to be moderately impacted. The most impacted sectors, according to Brand Finance, included leisure and tourism, banks, apparel, oil and gas, insurance, as well as aerospace and defence.

brand finance tech sector brand value 2
brand finance tech sector brand value 2

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