The reaction was swift when Facebook recently announced that it was changing its name to Meta. People rushed make mocking tweets and reviews underline the moment was eerily close to the fallout of a whistleblower reveal the deep problems of the company. Others bought shares in an obscure Canadian companyâMeta Materials â thinking Facebook’s ticker had already changed.
CEO Mark Zuckerberg says he’s renaming Facebook to signify the change that occurs within the company while it helps to build the “metaverse” –the future of the internet. He says he also wants to avoid the “confusion and awkwardness” that comes with having his company sharing a name with one of its apps, and has been considering a rebranding since he bought Instagram and WhatsApp in 2012. and 2014, respectively.
Arguably there’s also likely an effort to reshape public perception of the social media giant: the name change comes after years of controversy around Facebook, including the use of the platform by military officials in Myanmar to incite genocide, and the large-scale data mining of its users for political advertising targeting.
But what effect can a name change actually have on a business and its bottom line, and what are the costs and risks associated with rebranding? The answer isn’t straightforward for any business, but especially not for a global tech company like Facebook that has a name as ubiquitous as social media itself.
“This kind of [re-branding] campaign takes place over many, many years and probably costs billions of dollars in the long run, âsays Brett Caraway, assistant professor of media economics at the University of Toronto. He adds that because the company has already invested a lot in the name Facebook, the stakes are high.
âYou’re trying to undo or rearrange what you’ve already established, and there’s an inherent risk in that. “
Even with risks, Caraway points out that Meta isn’t the first big tech company to change its name to mark a new direction. The same happened when Google rebranded itself as Alphabet in 2015, in an effort to create an identity that went beyond the powerful search engine. Alphabet, Google’s parent company, also has subsidiaries like YouTube and Fitbit.
“By giving them different names, it gives an idea of ââhow each branch works together and how independent it is,” says Carraway, who adds that the company wanted to show stakeholders that it is also investing in different areas of its business. activity, like Android. and the smart city development organization, Sidewalk Labs.
âIt’s important for the way they run the business, but also for the way shareholders understand the operations of the business. “
There are similarities to Facebook’s decision to change its name. The metaverseâAn interactive online universe that Meta hopes to pioneer â is an area where the company plans to devote more resources, especially as Facebook, the social media platform, is increasingly seen as a tool mainly used by the older generations.
But changing names is also a tactic some companies use to steer clear of controversy. Edmonton Football Club recently rebranded its old racist name, a move that cost $ 2 million but was widely applauded by fans.
A less successful example is that of the American tobacco company Philip Morris became Altria in 2003 to protect its non-tobacco brands from the negative perception of cigarettes in North America.
Joanne McNeish, professor of marketing at Ryerson University, says the company has probably spent millions on branding, logos and trademarks, just to keep consumers in the know about Altria’s tobacco roots. (Ryerson University in Toronto is also changing name distance himself from Egerton Ryerson, one of the architects of Canada’s residential school system.)
In Canada, McNeish says national name changes generally tend to be less noticeable, reflecting the country’s calmer and more conservative business environment. It indicates when The Bay has changed its logo to that of Hudson’s Bay, and when banks like the Royal Bank of Canada or the Bank of Montreal changed their abbreviations as they became more involved in the global market.
But even seemingly minor changes can come at significant costs.
âIt still costs millions of dollars because you change everything from business cards to building signs and checks,â says McNeish. âWhen you do all of that and it doesn’t lead to increased sales, it basically impacts profits. ”
This was the case when Coca-Cola released the “New Coke” in the 1980s with the aim of redistributing the market share of competitors like Pepsi. The new product was nicer and the company thought the rebranding would be successful, but âit failed dramatically,â Caraway explains. As it turned out, consumers liked the original recipe and asked for it to be brought back.
Rebranding failures show it’s important for businesses to think more than dollar signs when making changes, says McNeish, because a name “acts as a cue” to the consumer and shapes their experience and behavior. knowledge of a brand.
McNeish says the move from Facebook to Meta suggests the company will focus on its first social network headed elsewhere, and that it will invest in other platforms or businesses over time.
“In other words,” she said, “they’re going to slowly quit the business of Facebook.”