The topic of brand equity has recently hit the headlines on the back of X’s (formerly known as Twitter) radical rebrand. Previously known for its iconic blue bird and valued outlook on microblogging in the social media marketplace, X enjoyed strong brand equity from its inception in 2006. Through altering this well-established identity, X may be risking not only the emotional bond formed with its customers, but also financial implications surrounding the company’s advertising business.

As to why Elon Musk, X’s tumultuous CEO, decided to push ahead with his decades-long ambition for a company to be called ‘X’, let’s first explore the real value of brand equity. More than flashy branding and pop culture saturation, brand equity is a very real and compelling asset for a brand, associated with social as well as monetary gain for a business. Without this equity, many brand commentators fear (or rejoice) that X’s rebrand may be something of a non-starter.

What is brand equity?

Brand equity refers to the sense of ‘added value’ associated with a particular brand, product or service, on top of the actual value of the offering. Brand equity encompasses how customers think, feel and act towards a brand, and as such often stands in for the emotional connection or association that exists between a customer and a brand.

As one commentator puts it, X’s re-brand can feel almost like an “act of betrayal” among loyal customers who have used the service for any length of time.

“Consumers don’t love change” says Zach Dioneda, VP of brand marketing at Public.com, “and there’ll be people that feel as if it’s an affront to them as a loyal user”.

Strong brand equity can help to nurture customer relationships, as well as provide a competitive branding advantage. For instance, a well-regarded brand can be more successful in launching new products or entering new markets. Additionally, companies with strong brands are often more attractive to potential partners for collaborations and are more likely to receive positive media coverage. Altogether, these attributes contribute significantly to the overall social value of a company.

What are the potential financial implications of X’s re-brand?

Brand equity carries immense tangible value for a business, and any re-branding decision must be considered against the financial implications of doing so. A number of studies show that brands high in equity are more strongly preferenced than brands lower in equity. This effect also extends to purchase likelihood, highlighting the potential monetary implications of cultivating brand equity.

With specific focus on the social media industry, who rely greatly on advertising funding to remain afloat, there is added risk emerging from a re-brand. With X’s track record of high performing advertising services, any potential changes that come with the rebrand could also impact advertisers’ willingness to allocate media budget to the channel over competitors.

The reaction of X’s user base is also a crucial factor. If the re-brand is not well-received, leading to a decrease in user engagement or a loss of users, this could negatively impact the reach and effectiveness of advertisements on the platform. A potential consequence of this is a reduction in advertising spend, an experience the company is still recovering from following Musk’s purchase of Twitter in early 2023.

Are there any benefits to a re-brand?

Sacrificing brand equity as part of a re-brand is not necessarily a loser’s game. For instance, a fresh brand may attract a new demographic of users and advertisers, expanding the platform’s reach and influence. Moreover, the move to X could be a strategic response to recent controversies associated with Twitter, acting as a symbolic ‘line in the sand’ to signal a fresh start.

While there are risks associated with the re-branding, there are also potential opportunities for Musk and his team. The coming months will act as a test of the appropriateness of the decisions made during this transition and will ultimately determine whether this bold move pays off.

Given the context surrounding Twitter’s rebrand to X and the loss of its prior equity, it is clear that potential repercussions and benefits await. In terms of social implications, this shift could risk the emotional connections formed between the service and its users. As for financial consequences, it is likely that the rebrand may cause advertisers to think twice about their media allocations, potentially causing larger issues within the organisation.