Branding is the buzz word that spins billions of dollars in spending from the smallest companies to Fortune 500 giants. There are methods and procedures to measure brand-equity, but there is no methodology (yet) to tell whether the branding good, or less, or excessive, or bad. In the following paragraphs, we examine how famous brands went ahead and branded way too much for their own good – giving us some staggering cases of bad branding!
So how rich is Facebook?
Answer: Rich enough to put its founder in line with Microsoft and Amazon founders on the “richest list”.
When Facebook acquired WhatsApp for $19.3 billion in February 2014, many people wondered why! At that time, it became the largest acquisition of a venture-backed enterprise. The real surprise was the fact that WhatsApp was valued at only $1.5 billion just a few months before this acquisition actually happened.
If Facebook wanted to build a similar app (like WhatsApp), with its unparalleled user base and deep pockets, it would have done that in less than a month, and probably may have taken some time to position it in the market with a negligible fraction of the cost that it paid for WhatsApp. But why did Facebook buy WhatsApp for such a huge sum?
Ditto is the case with FB and Instagram!!
Let’s quickly examine another story of Amazon’s acquisition of Whole Foods for a staggering $13Bn. If you look at Whole Foods, there is nothing unique, disruptive about its concept. Amazon could have built stores similar to that of the Whole Foods chains, in no time and again, at a fraction of the cost they paid for acquisition!
Why did Amazon buy such an ordinary business?
The story of Wal-Mart and Jet.com sits in total contrast to Amazon. For the start, Wal-Mart is one heck of a brand that could not care less about competition in the physical market with its mammoth supply chain and global footprint.
And it is not as if Wal-Mart is making just a passing effort at selling online. They are just as desperate as any other e-commerce out there is. And that is the reason Wal-Mart made a $3 million investment to buy Jet.com.
What struck us hard was this common thread in all of the above three acquisitions. In each case, the company that acquired could easily float a company similar to the one which was acquired! For all you know, that could have been done for less than half the deal value.
Why are big brands buying what should be by their metrics “smalltime companies”?
The answer lies in a disturbed concoction of brand marriage and bad branding. No, we don’t mean to scare you with excitable terminology. Hang there for a moment and we will break it down together.
When Amazon bought Whole Foods, this is what Business Insider noted:
“Maybe it was just the hype surrounding the merger and the chance to get Whole Foods products delivered to your door, but the impressive sales generated the first week they were available online underscores the strength of this tie-up. Take one brand’s reputation for high-quality goods and the other’s unparalleled ability to deliver on both price and convenience: This could be a wedding for the ages.”
Okay. Turns out it wasn’t just “yearly luxury marketing” for Amazon. The move was both well-thought and rigorously planned. By buying Whole Foods, Amazon blended their inimitable reputation with online food delivery. And people loved the way this cake was baked!
Home Run: Amazon.
That was the brand marriage part. Now, let’s focus on the bad branding bit.
Amazon have been bad with their branding!
Before your instinct tells you to bash us left and right for saying that, hear us out. Amazon have been the face of e-commerce ever since the funny term was invented. In fact, Amazon is so big, that for a brief while last month, Jeff Bezos’ net worth exceeded that of Bill Gates!
But what goes around, comes around.
The bigger Amazon became in the virtual universe, its chances to set up physical stores shrunk beyond imagination because the moment you hear AMAZON, you think of online shopping, and it never reminds you to go to a brick and mortar shop, even if Amazon has one. Probably, you will not enter a store named “AMAZON” when you go for shopping, you will look for Target or Walmart instead!
Amazon were smart enough to realize this. And as outrageous as it sounds, they may have accepted defeat. The multi-billion dollar company understood that irrespective of how hard they tried, they could never have shaken off their “online” tag. That’s bad, unidirectional branding if you ask us.
Irrespective of the thrills and frills of the internet, the world still shops offline. And Amazon wanted to capitalize on that, too. So what did they do? Well, they bought Whole Foods – an established physical storethat sells quality food products.
Walmart is the antithesis of Amazon
But when it comes to online shopping, Wal-Mart does not only suffer from lack of dynamic branding but also realizes how thin a chance it has given Amazon’s massive dominance in the sector. The YoY (year-over-year) online sales growth for Wal-Mart for Q2, 2017 was just 1.8%. Compare that to Amazon nearly doubling its stock in the last two years.
This is what CEO Doug McMillion had to say on it:
“We need to scale our e-commerce business further and see some additional strength in our store comps to deliver the results we know we’re capable of.”
Again, let’s pull back a minute to analyze how unidirectional branding hurt Wal-Mart. The company had invested so much in making itself into the brick and mortar store you will ever need, that it became quasi-impossible for it to transform itself into an e-commerce giant. The reason is, when you think of Wal-Mart, you want to take out your car, drive into a huge store, go round the aisles, buy, eat a sub and come home! A half-a-day family time! How many people ordered things from Walmart.com!!
Walmart did just the opposite to what Amazon has done – an online brand bought a physical stores chain, and physical store chain has bought an online store!
Close your eyes and imagine Facebook! You can never think of it as (just) a messaging tool. Their brand itself is a hurdle for them to build a messaging app, and therefore, they bought WhatsApp and Instagram!
Branding is an important and carefully planned activity of any business. We, at Apportunity/Futran, help our customers not only build their Apps but also help in advising them in Branding.
Our app development team at Apportunity runs a free mobile application visibility analysis for your new or old business and makes you ready to leverage the unbridled potential of next gen app marketing.
The author is the CEO of Futran solutions, Inc. Futran Solutions recently acquired Indian App development company, Apportunity.