New paper reignites war of words on brand valuation ranking tables 25 Apr 17
A white paper from trademark database manager Markables calls on the brand valuation industry to cease publication of ranking tables, and has reignited the debate over valuation methodologies – with valuers, brands and the media coming under fire.
In 2015 we reported on a previous white paper from the company, which compared the brand valuations published in public league tables with the values cited in market transactions. That paper escalated the war of words over brand valuation methodologies, critiquing both the approach taken by valuers and the very concept of league tables. Two years on, Markables has released a new paper titled “We have had enough: ten reasons to stop the brand value rankings” that is an even more stinging retort to the trend of yearly brand valuation league tables.
The move is partially motivated by what it regards as a “fast-increasing number of ranking reports released in early 2017”, and seeks to outline “arguments why brand value rankings are useless, misleading and sometimes even harmful”. We have previously covered the arguments made by Markables, which offers a database of published and audited trademark valuations. In its latest publication, it lays out ten arguments why brand rankings should be stopped:
- An unpaid, ‘outside in’ valuation will provide a less robust result than one that has been fully commissioned and is based on inside information, with an “accuracy sacrifice” made in valuating for ranking purposes.
- Such tables are marketing tools for valuers (and those seeking to market related advisory services) rather than being created out of a feeling of social responsibility.
- That brand values from league tables “miss realistic transaction values”, therefore they have “little to no relevance for transactions”.
- That rather than seek to converge their approaches, valuation firms see their differences of opinion as a “sign of health and vitality”, and in doing so “mistake valuation services for competitive positioning”.
- Brand valuation for rankings lacks a market check or other forms of reality check – therefore, valuers bear no risk of being sanctioned for weak valuation performance.
- That the proliferation of tables has led to mistrust of the quality of rankings.
- Valuations can be tampered with, either by brand owners overtly influencing valuers or valuation firms seeking to retain long term clients or to attract new business with a positive ranking.
- League tables do not add anything “new and relevant” to investors’ decisions – the paper reports that comparisons of the performance of brands drawn from rankings tables with market indices such as the S&P 500 are of limited value as beating a broad market benchmark that includes oil firms, copper mines and banks is “not a big deal”. It adds that when such brand indices are compared with similar, consumer based indices their performance does not generally outperform the market.
- A valuation listing on a ranking can have fatal effects for brand owners and their tax liabilities as authorities compare the brand value which has been submitted to them by a brand owner/taxpayer with the corresponding brand value they find on a ranking. The disparity can be used in tax disputes over substantial perceived arrears.
- As rankings are compiled from an outside perspective, they re-enforce the perception that brand management and marketing professionals do not need to engage with accounting and finance colleagues.
The 29-page document is pretty scathing with respect to those who have bought into rankings tables, whether brands (asking them to only cite valuations they have themselves commissioned) or “reporters and journalists who simply copied and reproduced the rankings at face value”. This isn’t restricted to the IP press, but of course World Trademark Review itself has a history of covering brand valuation stories. The discipline has a clear payback for trademark counsel and counsel have previously extolled the benefits of published third-party valuations. Reflecting reader interest in the topic, our current issue cover story focuses on the latest Brand Finance Global 500 (and we have collaborated with the company for a number of years now to bring detailed analysis of its annual list). We have also covered the debate that has raged over brand valuation methodologies and the use of such rankings, as this too is important to explore.
Responding to the report, Brand Finance CEO David Haigh offered this strongly-worded statement: "We are aware of the Markables report but we are reviewing its technical merits and potentially defamatory remarks about Brand Finance and will respond when we and our legal advisers have a full and considered response to Markables unprofessional and unfounded criticisms of Brand Finance"
The contents of the report and Brand Finance's response demonstrate the passionate debate being had around the publication of brand valuation rankings. Realistically, those rankings are unlikely to disappear anytime soon, and neither will the emotive (and often heated) discussion surrounding them. That is in and of itself not a bad thing – the discussion is an important one to have and enables a deeper understanding of brand valuation methodologies. That is a benefit to all in the industry – as long as the debate is fair and transparent.
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