A brand analysis on Microsoft’s acquisition of Activision Blizzard
After a long back and forth with the FTC and other regulatory bodies in the world, Microsoft’s acquisition of Activision Blizzard is finally cleared.
What’s notable is that in May of this year, Microsoft’s Gaming exec publicly admitted that Microsoft has “lost the gaming wars” against Sony and Nintendo. Is this a comeback for Microsoft in the fourth quarter of the gaming wars?
In this article, I’m going to talk about the brand implications Microsoft faces with Activision Blizzard following the acquisition. Of course, there are other internal and external influences to the success or failure of an acquisition. For instance, organizational management, financials, technology integration, competitors, among others. However, even if all those other factors play in the favor of Microsoft, without managing the brand effectively the acquisition is likely to fail.
I’ll discuss this from three aspects: brand strategy, brand architecture, and brand value. If you’re a video type of person, feel free to click over to the YouTube where I talk through my thoughts on this.
Brand strategy
What is brand strategy?
Firstly, what is brand strategy? There are so many ways to define brand strategy, but on a high level it’s a roadmap guiding the brand from where it is to day to where it desires to go in the future. The brand strategy is informed by the business strategy, but is infused emotively and meant for a wide range of stakeholders, like business leaders, employees, consumers, shareholders, and investors.
There are many frameworks and ways to define brand strategy, but in general there are two important elements to consider — the long-term goals and short-term objectives. For the long-term element, some call it brand purpose, brand promise, brand mission. This guides the brand, its leaders, and its employees, like the North Star in a brand’s journey. If it’s a good strategy, it is the direction that all brand actions, products, services should point to. The second element is the short-term goal. This is the stop along the way, the three to five year goal signaling how the brand will be able to reach its long-term goal.
Looking at Activision Blizzard’s and Microsoft’s brand strategies
Microsoft captures as brand strategy as:
Our mission is to empower every person and every organization on the planet to achieve more.
Activision Blizzard captures it as:
We connect and engage the world through epic entertainment.
At first glance, they’re focusing on different things. Activision Blizzard focuses very heavily on human engagement, interactions, and entertainment. Microsoft focuses very heavily on empowerment, inclusivity (reference to every person and every organization), and achievement.
But if you zoom out, you’ll notice that they both talk about their brand purpose from the perspective of global humanity. Activision Blizzard refers to their audience as “the world” and Microsoft talks about “the planet.” Different terms, but same perspective. The connectivity is there.
In fact, I would argue that the Activision Blizzard mission ladders up to the Microsoft one. Because in order for every person and every organization on the planet to achieve more, you need mental and physical well-being and that is what Activision Blizzard brings. Through entertainment, they’re connecting people and building relationships. As social beings, humans will feel miserable without relationships and connections. One needs to have that foundationally to check off first before they’re able to reach their achievement potential. This aligns with the reality that Microsoft is acquiring Activision Blizzard organizationally. So, strategically I think it fits.
Brand Architecture
The brand architecture is how the brand family is presented externally. Similarly to how a company has their organizational structure internally, the brand architecture is for external parties to see how the brand is organized. They are guideposts showing how each brand relate to each other. Why is it important? Because without a clear structure for customers to navigate while they’re going through the purchase journey, they will get lost. That means lost revenue, and very bad for business.
I would characterize Microsoft’s brand architecture today as a largely monolithic hybrid brand. There are very strong brands that carry the Microsoft name — Microsoft 365, Microsoft Bing, Microsoft Office, etc. very strong brands that the Microsoft family has for example Microsoft office Microsoft 365 there’s also Microsoft Windows. These can be categorized as ingredient brands, component brands, or sub-brands. Different name tags, similar meaning. There’s also independent brands — such as Xbox and LinkedIn. These brands aren’t tied to the Microsoft brand directly from their brand treatment, even though most are aware that these are products that the Microsoft company own.
Then, looking at Activision Blizzard. First, the logo really stood out to me. It stood out to me because this does not seem like a rationalized logo. It seems like an interim logo as the companies are going through a merger migration strategy. And, it’s like they merged the companies, developed new products and forgot about the brand. Because of this, I suspect the brand equity lies in the product brands, rather than the Activision Blizzard parent brand.
Microsoft already has Xbox as its flagship gaming brand. It would be inefficient brand management to maintain two gaming brands. Putting the Activision Blizzard brand against the Xbox brand, I think Xbox would win. In that case, Activision Blizzard products will probably be moved under the Xbox portfolio.
Brand Value
Similar to values that we see in math, the brand value could be a positive or a negative depending on whether the brand is an asset or a liability. Brand value captures aspects of brand recognition, brand association, and customer loyalty (Prophet).
For Activision Blizzard and Microsoft’s brand value, it would be important that the sum is greater than the parts. We know Activision Blizzard is not going to be of as much value as Microsoft as Microsoft is the second best brand in the world with billions of dollars of brand equity (Interbrand). As I mentioned, I suspect the Activision Blizzard brand has less value than its product brands. Regardless, there would have to be brand valuation or customer resource to validate that assumption before brand decisions can be made.
But just because Activision Blizzard’s brand value does not match up to Microsoft’s, there isn’t a clear answer of how the brand should be managed moving forward — if they should or shouldn’t continue to invest in the brand. That’s where Activision Blizzard’s brand value comes in to the equation. To manage the brand, you’ll need your own marketing team, you’ll need your own personnel associated, among others. There’s investments to be made to build and maintain this brand. If that value that comes from Activision Blizzard does not match up to the investments required to maintain the brand, then the Microsoft company will probably choose to retire it.
If Microsoft makes the decision to retire the Activision Blizzard brand, even then they probably will not and definitely should not investing in the trademark in all its global markets. Because if they stop paying for the trademark, then theoretically anyone — me or you — could go to the US Trademarks Office and purchase it. Then, we could just establish a new gaming company. That would create so much confusion in the market and so much trouble for Microsoft. I don’t think they will ever allow this to happen because Microsoft has big name lawyers, but if they ever mess up and lose that trademark we can snatch it up.
All in all, that’s the things I would look out for and the things I think are going to happen in the coming months to the brands. Of course, the success of the acquisition won’t just come from the brand. But, without managing its brand correctly, it would be hard for the acquisition to be a success.
