Fast Company recently got access to an internal study undertaken at Airbnb, which tries to quantify the impact that investing in brand-building can have on an enterprise. Precipitated by Airbnb chief marketing officer Jonathan Mildenhall—who previously was a top executive at Coca-Cola—the study’s underlying assumption is that the tech community does not understand and appreciate what brand strength delivers, and that by not leveraging that tool, Silicon Valley (for all its success) has left huge value unexploited.
I sat down with Airbnb’s head of brand, Nancy King, and TBWA\Chiat\Day chief strategy officer Neil Barrie to discuss the internal study. An edited excerpt is below. You can find an abridged version of the study itself here.
Fast Company: Airbnb recently undertook an internal study of iconic brands. Why?
Nancy King: We have incredibly smart investors who are scrutinizing every decision we make. Last year we hired a new CFO, and the first thing he did was look at every place we were spending money. The value of brand is hard to explain to people who think in terms of spreadsheets and finance. The idea was to explain the value of a brand using terminology and language that people who sit on finance teams or are investors could understand.
Neil Barrie: As a discipline, agencies and marketers haven’t always done the best job pointing out how what they do tangibly impacts the bottom line. It was an opportunity to create a shared language, a shared reference point.
FC: There is a belief in much of Silicon Valley that you don’t need to invest in brand marketing because your product itself is the brand.
NK: Our biggest barrier to growth was that people thought we were weird. We built a great product, a lot of people loved us. But a lot more people were never going to get to our product because they were scared about what we did. The barrier that they faced was not something we could solve at the product level. It was an emotional challenge. We needed to help normalize behavior that people weren’t comfortable with.
FC: In your study, you identified five key brand attributes.
NB: We asked ourselves, what do we mean by a truly iconic brand? The first characteristic is that they are instantly recognizable visually: You look at a Coca-Cola, at a Starbucks, you recognize that brand wherever you see it. One of the first things my kid said was “Starbucks,” pointing at a logo. The second ingredient is a universal value proposition. The third is that they genuinely play a role in culture. Apple, for instance, is not just taking from culture. They are actively driving culture. And then the fourth ingredient is, do they tap into higher-order values that transcend the product—and actually stand for something. The fifth is all about emotional connection, and that is really the root of it. That’s where a brand like Disney has really benefited. It has leveraged the power of emotion. We make decisions emotionally more than rationally. Brands have a unique ability to tap into that decision-making.
FC: So how does an investment into being an iconic brand translate into money?
NB: There are four dimensions of value. The first is financial: Brands are a financial asset on the balance sheet. That’s one reason you should invest in them. When Gillette was acquired by P&G, the value of the brand alone was $25 billion. Number two is consumer value: Brand drives consumer decision-making. Number three is growth: Brands that transcended their category and cross over into different products, a lot of them have a clear iconic vision. The way that Apple has managed to go from a desktop computer to an iPod to a phone to monitoring people’s fitness and being a watch, it’s coming from the same thing: creative tools for creative minds. That empowers and enables them. And the fourth value is cultural value: Iconic brands have a disproportionate share of cultural voice, and they hold the internal culture of companies.
FC: Right now in the marketing world, there is a focus on metrics and data. You can measure the ROI, the return on investment, from every dollar that you spend. Building brand value is at the other end of that spectrum. How do you have that conversation with the Airbnb leadership?
NK: When a company is growing as fast and organically as us, you can assume that it’s going to grow like that forever. But there are companies like Expedia or Priceline that are spending five times as much trying to go after the same people, trying to move into our space. How do we win against them over time? New startups are also coming in, trying to replicate our business model. How do we win against that? Historically there was a belief in Silicon Valley that technological IP made you win. You have something that nobody else can build. You patent it. But Airbnb doesn’t have that. In an environment where people can copy what we have, what prevents people from choosing those other companies over us?
FC: You spent a lot of money on your “We Accept” Super Bowl ad. Was there a discussion beforehand about the metrics for the return on that investment?
NK: Candidly, the Super Bowl ad was more art than science. It’s an example of how we use our brand as guardrails to make decisions. Our company mission is to create a world where anyone can belong anywhere. You have to create more acceptance. And we were in an environment where there were a lot of questions about acceptance, and what it means to be accepted. We also had a conversation with our product team, and they elevated the point that the “accept” button on our website is actually the most used button. This video originally was not meant to be an ad; it was supposed to be on the site. But we recognized the power of the idea of acceptance, especially within the cultural narrative that was taking place. And really, we just decided to do it. It felt like the right thing to do. So far, I haven’t gotten any questions about what the ROI was on it.
FC: If you hadn’t done the iconic brands study in advance, would the reception to the proposal to do the ad have been different?
NK: Potentially. It’s a long journey to get people on board to the value of brand. The study has definitely helped reframe it.
FC: Facebook has built this enormous global business without really spending on branding. Doesn’t Airbnb arguably have the same kind of viral loop that it can take advantage of, as hosts and customers market the platform for you?
NB: Every disruptive company has a natural viral audience that word-of-mouth can take it to. If it’s a cool enough product, you’ll get the early adopters. But most brands, if you really want to scale, there’s a time when you need to cross over—in the case of Airbnb—from urban, metropolitan hipsters, people who think it’s cool to try this brand, to more lucrative audiences like young families or boomers who don’t think it’s cool to try this brand, it’s actually potentially risky. You need a whole different set of tactics and tools to do that. Every brand faces that moment when they have to cross the chasm.
NK: We did a big global study to determine how big the audience was that would be most receptive to Airbnb. But there’s a much bigger group if you look at overall travelers. That’s really the challenge that we’re up against.
FC: Was last year’s Live There campaign gauged to attack that?
NK: Yes. That campaign was the first time as a company that we were able to talk about what we do in a way that was succinct and accessible. By talking about something people understood—living somewhere—you could explain something that they didn’t understand. It also changed the way we thought about our product mix. How do we build services for people when they’re in a particular place, so they can feel like they live there? That was the first example of product and marketing, two sides of the business, working together against a shared idea.
FC: The product side is skeptical of the marketing side?
NK: All product companies are skeptical of marketing.
NB: Those of us in the advertising and marketing industry haven’t done enough to join up the two worlds. I judged the Effies the last couple of years, the global effectiveness awards for the communications industry. Quite a lot of entries have metrics that don’t really matter. “We really needed to be the most talked about sponsor of the World Cup,” or “We absolutely had to hijack the conversation around the Grammys.” But why did you need to do that? How does that help the mechanics of your business?
NK: I’ve worked for companies that say, We’re trying to participate in the conversation around National Popcorn Day. If you think National Popcorn Day is a way to talk about your brand, then you probably haven’t figured out what your brand stands for.
NB: Unless you’re a movie brand.