Written By Fabiha Naz Kabir
In its eight consecutive year, Forbes has released the list of the World’s Most Valuable Brands list on May 23rd 2018.
Upon a slight inspection of the list, it is quite evident that the tech industry is clearly booming with many of the tech based companies making it to the list. Apple, Google and Microsoft, respectively, rank as the top three most valuable brands like last year. “The world’s biggest tech companies have consolidated their power in recent years, driving huge profits and soaring market values. Apple (phones), Google (search), Microsoft (software), Facebook (social) and Amazon (retail) dominate their respective sectors thanks to winning products and services. But perhaps their most prized and valuable attribute: strong brand names,” Forbes wrote when announcing the list. The robust brand name is what helps these companies propel the demand for their products and gain pricing power. It does not come as a surprise that these 5 tech brands are in the top 5 Forbes’ count and are worth $586 billion when combined, up 20% from last year.
The evaluation for 2018 began with more than 200 global brands to arrive to the final list of Top 100. It required all brands to have more than the sole presence in U.S. only, thus knocking out some of the big brands like multinational telecom firm Vodafone and Chinese Tencent and the e-commerce giant Alibaba.
The very first step in valuation of the brands involved the determination of revenue and earnings before interest and taxes for each brand. The information was procured from company reports, Wall Street research and industry experts. After averaging out earnings before interest and taxes (EBIT) over the past three years, a charge of 8% was subtracted as part of the of the brand’s capital employed, on the assumption that a generic brand would be able to earn at least 8% on this capital.
The second step was to apply the maximum 2017 corporate tax rate in the parent company’s home country to that net earnings figure based on tax tables from KPMG. Forbes then valued the brands on three years of earnings and allocated a percentage of those earnings based on the role brands play in each industry (e.g., high for luxury goods and beverages, low for airlines and oil companies).
The average price-to-earnings multiple was applied for over the past three years to these earnings to arrive at the final brand value of the company.
THE TOP 3
Apple: More commonly known as the “Tech Titan”, Apple has clung to the title of the most valuable brand in the world, with a valuation of $182.8 billion, an 8% one-year value change. Apple has set the bar exceptionally high over the past decade and is worth 38% more than Google that currently ranks second.
Apple has topped the charts due to its highly dedicated fans, who made the iPhone X a huge success irrespective of being extremely overpriced. Apple sold over 29 million phones in even less than two months, which is only possible when you have such loyal customers. Even though rival company Samsung sold more phones during the fourth quarter of 2017, Apple still bagged up 87% of the smartphone industry profits of the year. One-fourth of these sales were in China, indicating the endless demand for Apple products around the globe.
Google: Google has ranked second for the third straight year, with a valuation of $132.1 billion, which has increased by around 30%. It has been the leader in terms of cloud technology and internet search, in spite of the many efforts by Yahoo, Baidu and Bing. It is this very search business that is behind the 26% rise in operating margins. But a report by Brand Finance, a brand consultancy firm, suggests that Google does not put in much of its resource and energy in other sectors which may cause it to lag behind.
Microsoft: Microsoft ranked third in this year’s list with a valuation of $104.9 billion, an astonishing rise of 21% from last year. In 2018, Microsoft had a robust start mainly because of its cloud service. The company has had a sturdy growth since 2012 and made a new record in 2016, when its stock price reached an all-time high and beat a previous record set in 1999. The board has stated that it is extremely happy with CEO Satya Nadella’s work and believe that the company has flourished under his leadership.
Coca-Cola, which was the the only non-tech brand to have made it to the top five in the previous years, has lost it position to Amazon. Amazon overtook Coca-Cola and ranked 5th with a brand valuation of $70.9 billion. This was the only change in the top five list this year. The changing drinking habits worldwide have changed significantly, with consumers opting for healthier beverages and this seems to be impacting Coca-Cola. But Coca-Cola continues to lead the way in the branding sector and has become the first brand to record 50 million “likes” on Facebook last year and currently has 75 million fans on the social media site.
Cumulative value for top 100 brands: $2.15 trillion, up 10%.
Top Brands By Country: U.S. (54 brands), Germany (12), France, Japan (7), Switzerland (4), Belgium, Korea, Netherlands, Spain, Sweden (2 each), Austria, Canada, China, Denmark, Ireland, U.K. (1)
Top Brands By Industry: Technology (20), Financial Services (13), Automotive (12), Consumer Packaged Goods (11), Retail (9), Luxury (6), Diversified (4), Alcohol, Apparel, Beverages, Restaurants, Telecom, Transportation (3), Leisure, Media (2), Aerospace, Business Services, Tobacco (1)
Bigger Gainers: Netflix (35%), PayPal (33%), Amazon (31%), Google (30%), Facebook (29%)
Biggest Declines: Gillette (-11%), H&M (-8%), ESPN (-8%), HP (-6%), American Express (-6%)