How do you transform a company into a media and entertainment
powerhouse? Apparently, you buy the parts and put them together.
Like The Huffington Post for $315 million. StudioNow, an online
platform for creating, storing and distributing video for some $36
million. The technology blog TechCrunch for about $30 million.
Patch Media, a network of local-community sites for $7 million
(plus a commitment of $50 million to build out the network).
More vs. less
AOL is not an isolated example. More and more business leaders
base their strategies on "more," yet history suggests that the road
to success is "less."
What many business leaders are missing is the effectiveness (or
lack of effectiveness) of brands. When you expand your brand, you
weaken your brand. When you narrow your brand, you strengthen your
Take AltaVista, the first search engine. But "search" wasn't
good enough for AltaVista, so it added email, directories, topic
boards, comparison shopping and loads of advertising on the home
page. It also spent more than a billion dollars to buy a
portal-services company, Shopping.com, a comparison shopping site,
and Raging Bull, a financial site. In essence, it turned AltaVista
into a portal.
Hasta la vista, AltaVista.
By focusing on search, Google became the fourth most-valuable
brand in the world (after Coca-Cola, IBM and Microsoft), worth,
according to Interbrand, $43.6 billion.
So what did Google do next? Naturally, it expanded the Google
brand into a host of new businesses, including targeted ads in TV,
radio and newspapers.
Strong vs. weak brands
But here's the difference between AOL and Google. Expanding a
weak brand like AOL won't make the brand successful. Expanding a
strong brand like Google will weaken the brand, but the Google
brand itself is so strong that the differences are going to be hard
The three most valuable brands in the world (Coca-Cola, IBM and
Microsoft) have all been expanded. Yet these brands were
exceptionally strong before the line extensions took place.
Take Google. Potentially, the most valuable Google expansions
are not Google brands at all. They are YouTube and Android, both
the result of acquisitions.
Currently, Android leads all smartphone operating systems with
33% of the market. BlackBerry is second with 29% and the iPhone is
third with 25%.
It's odd. If a company buys another company, it normally keeps
using the acquired company's brand names. If a company develops a
product or service internally, it normally introduces the
development as a line extension.
Why the difference? There seems to be a feeling that if you
introduce an internally-developed product with a new brand name,
you are in some way "disloyal" to your company.
But loyalty or disloyalty has nothing to do with it. Brands
don't even make their primary residences inside your own company. A
brand is nothing more or less than a name that stands for something
in consumers' minds. That determines the value of a brand, not the
opinions of insiders.
Friendster, MySpace and Facebook
Take the first big social-media sites. Friendster was launched
in 2002, MySpace in 2003 and Facebook in 2004.
Facebook has become a powerful brand, valued at $82.9 billion on
a secondary exchange, SharesPost. The other two sites are worth a
small fraction of the value of Facebook.
What did Facebook do differently than the other two sites? The
same thing that Dell, Enterprise, FedEx, Subway and dozens of other
brands have done: Facebook started with a narrow focus.
Facebook membership was initially restricted to students of
Harvard, and within the first month, more than half the
university's students were registered. Then it was expanded to
other colleges in the Boston area, then the Ivy League, then
Facebook also launched a high-school version and later expanded
its eligibility to employees of several companies, including Apple
and Microsoft. Finally, it was opened to everyone ages 13 and older
with a valid email address.
Early on, as compared to Friendster and MySpace, Facebook was
perceived as more exclusive, an extremely important attribute for a
social-media site. It's only human nature to want to join the
That's exactly the strategy that has built many dominant
First, start narrow and build the brand. Then expand the
distribution only after you have built a strong brand. In grocery
products, for example, you might restrict distribution to Whole
Foods. In hardware products, you might restrict distribution to
Instead of a national launch, you might consider a regional
launch. Or perhaps launch the new brand in one city only. And then,
after its initial success, roll out the brand to additional
Invariably, today's strong brands started narrowly and expanded
only after winning the initial branding battle.
You can't expand your way to success. You can only narrow your
way to success and then hope you don't spoil that success by
overexpanding the brand.
ABOUT THE AUTHOR
is chairman of Ries & Ries
, an Atlanta-based
marketing strategy firm he runs with his daughter and partner