Thanks to Russell Davies (who far from needs my paltry link) for pointing me towards this:
[T]he most powerful brand in the world today is, according to the gold standard of brand valuation, Millward Brown’s Brandz report, Google.
Now, that might seem superficially logical. But from a strategic point of view, it’s nothing short of astonishing. Why? Because every other player in the top ten has spent decades – if not literally centuries, as for P&G and Coke – investing billions in advertising to build a brand.
But where these players invest on the order of 5-10% of revenues on advertising, Google’s advertising expenditure is almost exactly zero.
Stop and think about that for a second: the top brand in the world belongs to a player that…uhhh…doesn’t advertise.
What’s really going on here? It’s an example of what we discussed last week: how, in the edgeconomy -- an economy characterized by cheap, ubiquitous interaction -- the nature of advantage is shifting.
Brands are perhaps the most intuitive example of cheap interaction’s atomizing hand. Yesterday, they were a potent source of advantage. Today, the game has changed: investing in traditional brands is yielding fast diminishing returns, and leading more and more players directly into value destruction. That’s why it’s not just revolutionaries like Google, but also mass-market giants like Nike and P&G, who are rethinking orthodox branding.
How is cheap interaction driving the strategy of branding into decay?
Let’s rewind. What is a brand? It’s a promise: information from a firm promising you a set of costs and benefits from the consumption of a good or service. Brands shape your expected value.
Now, for the economics of an industrial era, branding made sense. Interaction was expensive – so information about the expected benefits of consumption had to be squeezed into slogans, characters, and logos, which were then compressed into thirty-second TV ads and radio spots. The complex promise of a Corvette, for example, was compressed into shots of cute girls, open roads, and lots of sunshine.
But cheap interaction turns the tables. The cheaper interaction gets, the more connected consumers can talk to each other – and the less time they have to spend listening to the often empty promises of firms.
In fact, when interaction is cheap, the very economic rationale for orthodox brands actually begins to implode: information about expected costs and benefits doesn’t have to be compressed into logos, slogans, ad-spots or column-inches – instead, consumers can debate and discuss expected costs and benefits in incredibly rich detail.
And they do – with a fervor that portends revolution. My favorite example is the What Are You Wearing Today thread at Superfuture, a fashion microcommunity (sorry for the unwanted attention, guys ). It’s literally thousands of pages of connected consumers posing, checking each other out, and telling each other if cool brands actually make them cool – or not.
Superfuture is the small tip of a very large iceberg: the massive defection to hundreds of thousands of social networks and microcommunities, where connected consumers endlessly discuss, debate, and validate brands and their promises.
Next week, we’re gonna square the circle, by understanding that the answer to the question I’ve raised this week – how has Google’s built the world’s most powerful brand in less than a decade? – has to do directly with Google’s refusal to invest in orthodox advertising.
But for now, I think it’s more important to use the Google and Superfuture mini-cases to discuss the deeper issue: that cheap interaction is reshaping advantage.
Can you see cheap interaction shaping and reshaping advantage in your industries? How do you think cheap interaction affects other sources of advantage, like scale and relationships?
