Porsche by VWAugust 9, 2019
Last week Volkswagen announced they are more closely linking the parent brand with the Porsche and Audi badges. The iconic sports and luxury brands would now be “Porsche by VW” and “Audi by VW.” Ironically, on the same day, Boeing announced it was adding the brand suffix “Max” to its 777 and 787 models, similar to the “737 Max.” When asked about the changes, the German and US manufacturers claimed this would be the fastest way to destroy billions in brand equity and obviate hundreds of years spent crafting some of the most powerful brands in history.
Ok, so the above did not happen. But it did, sort of. Facebook announced this week that Instagram and WhatsApp will be more closely linked to the mother ship and will become “Instagram from Facebook” and “WhatsApp from Facebook.” I, no joke, wondered if it was April 1 and the social network was trying to soften their image with a bad joke. But no, it’s August. About the same time there was a massive disturbance in the force, and every marketing professor in North America and Europe had a grand mal seizure.
Hard to describe how stupid this is. Adding words to elegant and simple brand names; taking brands that have so far remained fairly clean and polluting them with associations including teen depression, Cambridge Analytica, and, worse, Zuck. Reverse diversification of assets for shareholders. All the calories, less great taste. Huge downside, little upside. Why would some of the smartest minds in business make one of the dumbest moves in the history of marketing?
Ok, maybe not the dumbest. I live in NYU faculty housing (not true, I moved out six months ago, but just go with it — makes for a better story). A massive development project is underway on the five-acre plot behind my apartment building that looks like public housing in Gdansk, Poland, minus the charm. They have branded the development “NYU 2031.” So, every time I hear a jackhammer, I know it’s only 12 years until it stops. Why did no one call me?
Anyway, back to the most dangerous man in the world, Zuck. What is he thinking?
1. Brands have meaningful value, but monopolies have profound value. Zuck has decided the tens of billions in brand equity he is forfeiting by a bad marketing move is a good trade for the incremental protection this might afford his supernova monopoly, worth hundreds of billions. Don Draper owned a phat apartment on 63rd street. Zuck owns the whole block. Brands have ceded over a trillion dollars in value to algorithms over the last decade. Facebook is worth more than every communications firm on the planet, sans Google. People often ask me what stocks I own. Simple: the only investment strategy anybody needs is to own unregulated monopolies. I own Apple, Amazon, Facebook, and Nike. Ok, Nike isn’t a monopoly … daddy loves the swoosh. But I digress.
Zuck senses winter is coming and the FTC/DOJ are jonesing up for a fight. Facebook is coalescing around a few key lines of defense:
— Conjoined triplets. Zuck believes if he encrypts the back end of the three properties and makes them more one company than three, he can claim that any attempts to separate the babies will kill them all. While antitrust law should be immune from this argument, the reality is this will be a very political process with an assessment of the upside (oxygenating the tech economy) vs. the downside (destroying a great American company and billions in shareholder value). Zuck is hoping to make the downside appear more dire by tangling the spaghetti so as to appear more expensive and damaging to untangle.
— National champion. David Marcus, when testifying about why Libra wasn’t a key step toward tyranny (spoiler alert: it is), said that if Facebook didn’t offer a stablecoin, a foreign firm might. Oh no, here come the Chinese with their AI-weaponized firms! It’s the same nationalist argument made against Japanese firms in the eighties when they started overpaying for American movie studios and golf courses. Tim Wu (Columbia) has written eloquently about why national champions is a bad strategy.
— Stepdad. Children in homes with a single parent and live-in partner are 10 times as likely to be abused. Instagram and WhatsApp are not Zuck’s biological children, and it shows. The culprit in any grossly stupid brand strategy decision is always the same: ego.
Crazy is often the father of genius. But this will stay just crazy. In addition, the DOJ/FTC need to send a crisp signal that if Zuck wants to abuse his stepkids, they’ll put them in foster care even if they share the same last name.
Life is so rich,
P.S. I’m back on YouTube.
As I agree this is a risky move to associate Instagram and Whatsapp to Facebook in the mind of the users, I also see several benefits in creating bridges between the different communities, especially when you consider the payment functionality Libra would bring to the whole equation.
SG do you think breaking up the auto companies would foster the EV innovation we so sorely need? Your argument on the podcast recently about breaking up Google and FB to protect innovation in tech should apply here as well, but the structural challenges of the auto industry are way different… Thanks!
Great stuff as always