Digital challenge for brands

The latest annual global survey by the US-based brandchannel.com highlights an emerging trend: three of the five most influential global brands are online properties, namely Google, YouTube and Wikipedia.

The other two are Apple (computers) and Starbucks. This is a very different list from what might have emerged a few years ago, when almost all the top global brands would have been offline products from brick-and-mortar companies.

What are the key drivers of this new trend? First, there is the remarkably strong appeal of user-generated content, which is a radically different development when compared to the mediatory role played so far by supposedly knowledgeable people in the relevant field. Second, there is the ability of these online brands to build scale very quickly, which in turn has an equally high impact in the market. This too is something that many offline brands will find difficult to emulate.

For example, Google spread its dominance by not only building its strengths as a search engine in more and more countries, but also by developing a global advertising platform. Again, it spread its wings last year when it carried off a $900 million deal with News Corporation to provide service to sites and by purchasing the video site YouTube for $1.65 billion.

But perhaps its ubiquity can be gauged best from the addition of the verb "to google" in two major English-language dictionaries. On the other hand, YouTube, launched in 2005, gets 20 million visitors a month. And, since its creation in 2001, Wikipedia has grown steadily with pages in well over 100 languages.

With more than 1.5 million articles on the English version alone, it has emerged as a major online research tool worldwide. The point is that such rapid scaling up of activities and services in a virtually seamless world by online brands is difficult to accomplish for brick-and-mortar companies and non-digital consumer brands.

Third, the new trend shows that consumers worldwide are increasingly showing a willingness to lead "second lives" through the internet for e-commerce, education, communication and pure entertainment.

What are the implications of all this for old-style companies and brands? Clearly, the rules of the brand-building game are changing dramatically. If it took Starbucks, Sony, and Coca-Cola many decades and billions of dollars to build their brands globally, these online brands have done it in a matter of a few years.

New ways of brand-building, therefore, can have a crucial impact on the bottom line of companies in the future. The other point to note is that the new players have built their brands through creating communities of users, and building a strong 'connect' with them. So, brand relationships still matter and companies and brands cannot afford to lose them even as they grow big worldwide.

Finally, the online space, while creating a world where you can quickly build strong brands, can impact other brands negatively. Many brands that function offline, also have dedicated community sites that are maintained by consumers. The toy brand Lego was one of the early offline brands to exploit this route.

On the other hand, the proliferating phenomenon of blogs has the ability to damage the equity of other brands, products and services. The power of online properties can, therefore, be both beneficial and harmful.

Companies with offline brands have read the writing on the wall and are increasingly using an online platform in addition to offline channels. Further, brands like Apple, Star-bucks, Coke and Sony will still have their space, where consumers will want to have a piece of experiential marketing.