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Technology B2C | Ad revenue, incremental changes drive value rise

B2C and B2B brands collaborate to deliver the future

 

A 13 percent rise in value made technology the second-fastest growing category, after retail, in the BrandZ™ Top 100 Most Valuable Global Brands 2017. No single brand or product breakthrough drove this increase. Business-to-consumer (B2C) brands improved how they monetized their content. And both B2C and business-to-business (B2B) brands made incremental progress in preparing for a future of artificial intelligence (AI), virtual reality (VR) augmented reality (AR), the Internet of Things (IoT), voice recognition, and autonomous vehicles.

 

Of the 20 brands included in the ranking, only one brand declined in value, and several were among the fastest value risers in the BrandZ™ Top 100 Most Valuable Global Brands 2017, including Netflix, which rose 30 percent in value, and Facebook and Tencent, which each increased 27 percent. Both Salesforce and Samsung rose 23 percent.

 

In addition, Microsoft, IBM, and Intel each appreciated 18 percent. Three brands entered the BrandZ™ Technology Top 20 for the first time: YouTube, HPE (formerly part of Hewlett-Packard), and Snapchat. Google and Apple retained category leadership with modest value growth. (Amazon, listed in the retail category of this BrandZ™ Global Top 100 report, rose 41 percent.)

 

The sharp value rises for the B2B brands indicated that years of investment to transform legacy brands into contemporary cloud-based operations began to pay off. The even distribution of value growth between the B2C and B2B brands reflected in part how brands increasingly compete and collaborate across the consumer-business boundary.

 

In fact, few brands stayed in their lane. Even Facebook, a primarily consumer-facing brand, noted that 65 million businesses use its Facebook Pages, and many also use Instagram Business profiles and Workplace, a business collaboration tool. With its expanding influence, Facebook was one of several brands examining its responsibility to monitor content and protect the privacy of users.

 

Because of its vital role as data custodian and its centrality in connectivity and digital communications, the technology category was drawn into the whirlwind of geopolitical drama. Social media brands especially were at the center of the public debate when postings inflamed opinions about decency and free speech.

 

Maintaining the lead

Google and Apple retained the BrandZ™ technology ranking leadership with brand values of almost a quarter trillion dollars. Google’s search business and related advertising placement continued to drive revenue and fund long-term ventures, like autonomous cars, included in the finances of Alphabet (the holding company established in 2015).

 

Google accelerated its use of machine learning to improve core products, such as Google Search, Google Maps, and Google Translation. The brand introduced Google Home, a voice-controlled, home automation assistant capable of playing music and executing certain tasks, such as providing calendar reminders, news and weather updates, controlling lighting, and adjusting Nest thermostats.

 

Google also advanced work on its cloud capability and grew its G Suite, which it developed as a collaboration tool, especially for enterprise clients. Google revenues, including YouTube, grew 20 percent to $89.5 billion, providing virtually all the $90.3 billion reported by Alphabet.

 

The year’s geopolitical turmoil threatened Google financially when advertisers complained that programmatic technology, intended to align ads with relevant content, sometimes placed ads near controversial, even objectionable, material. The problem affected other technology brands, including YouTube, Alphabet, and Facebook. To address the problem, YouTube modified its advertising policy and accepted ads only for sites with audiences of over 10,000 viewers.

 

Apple stock appreciated based on anticipation of the 10th anniversary edition of its iPhone, expected in autumn of 2017, and recent device introductions, including the next generation MacBook Pro laptop and cordless earbuds. Both products reinforced compatibility within the Apple ecosystem. To make the MacBook Pro thinner than earlier editions, Apple substituted a smaller USB port. To encourage use of the cordless earbuds, recent iPhone models lacked a headphone port.

 

In a development related to defining the Apple brand, the latest prototype of its physical store, located in San Francisco, is no longer called the Apple Store. Instead, it is called Apple Union Square, as these locations now will take the name of their surrounding communities. The stores are intended to be local gathering places, and at least some will include conference rooms for meetings.

 

Brand importance

The strength of the Apple brand helped sustain Apple as it faced competitors producing quality, well-designed devices, but at lower prices. Facing a similar challenge, Samsung stumbled with the introduction of its Note 7 smartphone, which it quickly recalled because of problems with exploding batteries.

 

The Samsung brand proved resilient, and its next smartphone iteration, Galaxy S8, received positive initial reviews for its design, especially the large curved screen. And Samsung’s finances remained strong, primarily because of strong performances in other parts of its diverse product portfolio.

 

Challenges to Apple and Samsung came from Google, which makes the Android operating system that runs Samsung phones, and which introduced its own smartphone, named Pixel. In addition, Chinese smartphone brands, especially Huawei, found enthusiastic customers outside of China. Primarily a B2B technology leader in telecom infrastructure, Huawei smartphones sold well in many parts of the world, including Europe, although consumer trust lagged relative to Apple and Samsung, according to BrandZÔ research.

 

Microsoft, another company primarily focused on B2B business, also challenged Apple, Samsung, and other device makers with the versatility of its Surface devices, which can be used as tablets or laptops. Designed for business users, Surface devices also appealed to consumers. Their flexibility seemed an apt metaphor for Microsoft, as it moved through its third year of new leadership and evolving culture, attempting to develop products with greater customer centricity while still enjoying an annuity from legacy products like Microsoft Office.

 

Social media and content

The technology brands involved in social media or entertainment increased significantly in value last year; these included Facebook, Tencent, YouTube, and Netflix. And Snapchat joined the BrandZ™ Global Top 100. The reasons for the value increases varied by brand, but overall the phenomenon indicated growing industry sophistication in understanding audiences and being able to provide—and monetize—relevant content.

 

Celebrating its fifth year as a public company, Facebook continued to grow its influence, ending 2016 with over 1.2 billion daily active users (DAUs). Monthly active users (MAUs) surpassed 1.8 billion, and most daily or monthly users accessed Facebook on their mobile devices. The company articulated three priorities: monetizing video, adding advertisers, and making ads more relevant.

 

Facebook focused on making it easier for people to load and access video and on developing its own video content. The brand gained $26.9 billion in advertising revenue in 2016, and by early 2017 it announced that it had reached a total of 5 million active advertisers, mostly small- and-medium-size businesses.

 

Recognizing that how people interact on Facebook depends on their age and other demographic factors, the brand continued to add improvements to Instagram, Messenger, and What’s App—in effect, developing sub communities within Facebook. It also increased its use of VR and AI. And it introduced new functions, like Marketplace, that facilitated buying and selling items on Facebook.

 

Tencent, China’s leading Internet portal, remained China’s most valuable brand, based on the strength of its social media apps, including QQ (aimed at younger users), and WeChat (Weixin in Chinese). The social media apps combined reached almost 890 million MAUs, a year-on-year increase of 27.6 percent. These platforms helped drive advertising revenue with options including WeChat Moments, which connected ad content with relevant users and occasions.

 

The payment functions of these platforms increased in popularity. The number of MAUs of Tencent mobile payments exceeded 600 million, demonstrating the strength of the brand’s ecosystem. Starbucks announced plans to accept Weixin Pay in its 2,500 China stores as part of a partnership with Tencent based around social gifting. Although the insular nature of China’s Internet limited Tencent’s global expansion as a communication platform, the brand successfully exported its games worldwide.

 

YouTube expanded its original content and the advertising options. It expanded TrueView ads, videos of varying length with content designed to attract targeted audiences. YouTube also introduced the possibility of scrolling through related product offerings while watching the video on a mobile device.

 

Soon after Snap Inc. completed its IPO, it signed an agreement with NBC Universal to have the Snapchat photo-messaging app carry content from the 2018 Winter Olympics. It also began to redefine itself as a camera company, introducing a product called Spectacles, eyeglasses with a camera. Netflix grew revenue as it expanded its global viewers interested in on-demand movies or TV, and introduced more original content.

 


 

Brand-Building Action Points

 

1.          Make it simpler

Progress means that each generation of a device or software needs to be simpler to use than the earlier version.

 

2.          Sound human

Consumers expect technology brands to communicate in the language of engineers. That professional tone may build confidence, but it also confuses. Surprise people. Sound human. Talk less about the technology and more about the benefits. That is what Apple has done and what consumers now expect.

 

3.          Own the conversation

Many brands are competing in the development of the Internet of Things (IoT), but none has assumed the role of “category captain”—that is, setting the standards of IOT and being its public face. It is a large opportunity.

 

4.          Make media immersive

TV advertising is changing because people are watching TV in different ways. Move beyond feature-driven advertising. Be more immersive. Virtual reality will help.

 

5.          Take a stand

Consumers are politicized today and technology brands, in particularly, are often part of the conversation. It is risky for brands to insert themselves into the public debate. But sometimes, when brand core values are threatened, silence can be deafening.