Vol.65 – Web Equity Valuation in Japan – Model and Ranking

Web Equity Ranking of companies in Japan was introduced in a special article published in a recent Japanese business weekly magazine.




The author would like to outline the Web Equity valuation model and the results of the ranking based on the article.



1. What is the background of the Web Equity Valuation efforts in Japan?



It is the fact that the value of Internet as a communication channel and advertising together with its degree of influence are increasing in Japan just like in western countries.



For example, according to the survey result on advertising expenditure in Japan implemented by Dentsu, the leading advertising agency in Japan, advertising expenditure of the 4 traditional media (TV, newspaper, radio and magazine) for 2010 was decrease by 1.9% from 2009 when it was increase by 9.6% for the online advertising.



This means greater needs of means to know ROI of the Internet and website from companies leveraging the Internet and websites in their business, marketing and communication.



Therefore, a leading branding consultancy in Japan called Japan Brand Strategy developed a model of Web Equity Valuation for BtoC companies and started to publish the ranking after valuating 200+ web sites of around 2004.



2. What is the overview of the valuation?



1) Scope



Valuation of how much a corporate web site of BtoC companies contributed to the business in a year (April 2010 – March 2011) was calculated. Web sites of BtoB companies were excluded from the valuation.



2) Which corporate web sites



BtoC businesses were classified to 12 industries; electronics/machinery, IT/telecommunications, automobile/automotive, housing, entertainment/hobby related, foods and beverages, transport and leisure, retailers, finance and securities, energy and materials, toiletries and OTC drugs, and pharmaceutical.



And total of 236 leading corporate web sites were selected from each industry.



3) Data used



Data such as the following of each company was used in valuation.



- Financial data ending March 2011: if end of fiscal year is different, latest financial data was used.

- Result of online survey: implemented in July 2011, with 18,600 response



3. How valuation of Web Equity of each corporate web site performed?



“Sales Value” and “Information Value” of each corporate web site were calculated then the two were added together, as the Web Equity of the corporate web site.



Web Equity = Sales Value + Information Value



1) Sales Value



Sales Value is valuation of how much the web site contributed to selling of the company’s products and services.



This was calculated through the following 4 steps.



(1) Calculate what percentage of customers who purchased products and/or services used web site in their decision making.



(2) Calculate the degree (what percentage) the purchaser used the web site in their decision making.



(3) Multiply (1) and (2) to calculate effect of web site = average amount of information the purchaser used the web site in their decision making.



(4) Multiply (3) and marginal profit to calculate Sales Value.



2) Information Value



Information Value is how much the corporate web site contributed to brand enhancement of the company and its products/services.



“Access Value” and “Behaviour Value” were calculated and then added together to calculate Information Value,



(1) Access Value



Access Value is how much the online customer’s access to view the web site information contributed to brand enhancement of the company and its products/services.



This was calculated by multiplying PV (Page View) = number of pages of web sites viewed by value coefficient (unit value of a page set).



(2) Behaviour Value



Behaviour Value is how much online customer’s behaviour other than viewing pages such as applying for a campaign and requesting for pamphlets contributed to brand enhancement of the company and its products/services.



Number of behaviours such as membership registration and reading e-newsletters were selected.



Then for each behaviour, number of people who took such behaviour was calculated which was multiplied by value coefficient (unit value of a behaviour).



4. What was the result?



The top 10 companies were the following.



2011 / 2010 / Company/Brand / Web Equity (million yen)

1 / 4 / All Nippon Airways / 107,877

2 / 1 / Panasonic / 88,337

3 / 5 / Toyota / 72,337

4 / 3 / NTT DoCoMo / 60,291

5 / 2 / Honda / 56,960

6 / 24 / Nissan / 52,513

7 / 10 / Suntory / 51,787

8 / 6 / Japan Travel Bureau / 48,008

9 / 9 / Japan Airlines / 47,913

10 / 12 / UniQlo / 45,728



To the author, the companies/brands that were ranked in top 50 all in at least one of the following:-



(1) Strong corporate brand: e.g. Panasonic, Toyota, Sony, Honda, Nissan, Nomura Securities



(2) Strong product brand: e.g. NTT DoCoMo, Suntory, Kirin, Asahi, Coca Cola Japan, UniQlo



(3) Active in EC (Electronic Commerce): e.g. All Nippon Airways, Japan Travel Bureau, Japan Airlines, Japan Railways



(4) Leveraging SNS in their communication: e.g. Honda, UniQlo, All Nippon Airways, Suntory



(5) Leveraging Mobile: e.g. NTT DoCoMo, SoftBank Mobile, Tokyo Disney Resort



5. The author’s final thoughts



The Web Equity valuation model of Japan Brand Strategy may not be sufficiently refined from corporate finance perspective. It is nothing like corporate valuation model (of NPV = Net Present Value and DCF = Discounted Cash Flow) or of brand valuation of InterBrand.



Also, only BtoC company web sites are valuated. Many BtoB companies also leverage their web sites in their business and they cannot be disregarded.



Having said that, the result of the valuation and the ranking does provide us with some insights that help us coming up with clues what are required to enhance value of the web sites.



In one of her upcoming article the author would like to introduce some of the initiatives of the top ranking web sites that is assumed to made them to be of top ranking.





References:-

The web site of the weekly business magazine

http://dw.diamond.ne.jp/



Japan Brand Strategy - The web site of the brand strategy consultancy

http://japanbrand.jp/



Resources:-

A Japanese Brand Strategy Consultancy developed a Web Equity valuation model from which it calculated value of corporate web sites of major BtoC companies. Although the valuation is not necessarily refined as corporate and brand valuation model, it does provide us with some insights and help us understand what is required to enhance web equity.