Elon Musk and Barbie show just how intangible a brand can be

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When Mattel hosted a New York screening for its Barbie movie earlier this month, film-maker Greta Gerwig marvelled at how “brave” the toymaker had been at letting her play with its brand.

The film’s portrayal of an idiotic all-male Mattel board and questioning of its role in encouraging consumerism and bizarre body images was a gamble few marketers would take. According to Brand Finance, which calls itself the world’s leading brand valuation consultancy, it was a calculated risk: Barbie’s brand is now worth $701mn, up from $588mn last year, even if a surge in sales is not yet visible in Mattel’s earnings.

Mattel was confident enough to be “in on the fun”, Ynon Kreiz, its chief executive, told the Financial Times. But its irreverence towards valuable trademarks is nothing to what Elon Musk did this week when he rebranded Twitter as X.

Ditching a social media brand with near-global recognition would destroy almost $4bn in brand equity, according to Brand Finance. The consultant had already cut its estimate of the trademark’s worth by 32 per cent from $5.7bn last year as its revenues halved since Musk’s $44bn takeover last October.

Vanderbilt University, meanwhile, calculated Twitter’s brand value was somewhere between $15bn and $20bn. It is worth dwelling on that range of estimates: Musk, it implies, may have trashed an asset worth anything between 9 per cent and 45 per cent of what he paid for Twitter.

That disagreement matters: we live, we are told by the McKinsey Global Institute, in an era of “intangible capitalism”, where assets less physical than a machine or a factory are driving corporate growth. Yet we cannot agree on what those assets are worth.

Twitter is a private company, and it seems unlikely that such inconsistent outside estimates keep its impulsive owner up at night, but the same discrepancies affect even the world’s largest public companies. If you want to know what Apple’s brand is worth, Brand Finance puts the figure at $298bn, Interbrand says $482bn, while Kantar BrandZ comes up with an $880bn valuation.

That is a near-$600bn disagreement about one of the most scrutinised companies on the planet. Depending on which of these sources you believe, meanwhile, the value of the Microsoft brand may have plunged 21 per cent in the past year, or leapt 32 per cent.

Most investors spend little time trying to put precise prices on a company’s trademarks. Yet these things matter for everything from acquisition valuations to licensing agreements.

The question of what the Virgin name is worth, for example, is the subject of a $250mn dispute in London’s High Court between Sir Richard Branson’s holding company and Brightline, the US train operator which adopted and then dropped the Virgin Trains USA brand. The Virgin “masterbrand” is nothing less than the UK group’s most valuable asset, the court heard.

Our tools for measuring such assets yield “frustratingly inconsistent, discrepant, and, therefore, controversial results”, Harvard Business School lecturer Jill Avery observed in 2018. For as long as that remains true, any investor or lender trying to plug an estimate of a brand’s worth into their financial models will be flying blind.

In algebraic equations, such unknown variables are typically represented with an X. Perhaps, in toying with Twitter’s brand, Musk has made a more serious point after all.