Stripe Atlas and the Trap of Brand Extension
A few hours ago the popular payment provider Stripe announced a new service named Atlas to help people establish companies in the United States.
Stripe Atlas includes incorporation, a Stripe account, a bank account, legal and tax guidance and even 15k of AWS credits. Everyone I know who went through the tedious and error prone way of founding a company in the US was ecstatic when they heard the announcement.
This is a game changer.
And yet there is one thing about the announcement that made me cringe.
The Trap of Brand Extension
Instead of launching Atlas under its own independent brand it seems like Stripe chose to do what is commonly called a ‘brand extension’.
At first launching Atlas as ‘Stripe Atlas’ sounds like a no-brainer.
Stripe’s brand is well known. Also the use case of founding a company in the US is related. Atlas seems well aligned with what Stripe is already known for: User experience and making things easy that used to be complicated.
Why is this such a bad idea? Is it really a problem?
Stretching what a Brand is known for
Extending or (as it is sometimes referred to) ‘stretching’ your brand can have severe unintended side effects.
While there can be significant benefits in brand extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. Poor choices for brand extension may dilute and deteriorate the core brand and damage the brand equity. – Wikipedia
Right now Stripe is clearly positioned. if you’d ask me what Stripe stands for I’d say it is hands down the most polished and developer friendly payment processor I know.
Similarly about 10 years ago Google also was quite clearly positioned as the simplest search engine for the web that reliably shows you the best results.
Today it is a bit more complicated than that. Over the years Google has continuously extended its brand one step at a time and (un)fortunately makes a good example for how brand extension can hurt you.
To refresh your memory Wikipedia has a list of Google products (many of them are Google branded). It also includes a section about products that got discontinued. Here are just a few of the more popular discontinued products that you might be familiar with:
- Google Buzz (discontinued in 2011)
- Google Wave (discontinued in 2012)
- Google Reader (discontinued in 2013)
- iGoogle (discontinued in 2013)
- Google Moderator (discontinued in 2015)
- Google Code (discontinued in 2016)
Using the Google brand for all these products might have incrementally felt like the best option. In aggregate though I’d say those decisions hurt Google way more than they might have helped in the short term.
Each of these products could have been branded independently (anyone remembers Schemer, Orkut, …) but they weren’t and collectively they changed Google’s brand perception to a point where potential customers are now highly sceptical of adopting and betting on products released under the Google brand.
Interesting thought experiment: How strong could Google’s brand be today if it were still used solely for the search engine?
The Value of a Brand
Ultimately your brand is as valuable as what it represents in the minds of your customers. Diluting what your brand is known for through brand extension can be very costly and difficult if not impossible to fix later.
Not everything is lost though. In a way Google’s transformation into Alphabet might not only allow for a more effective organizational structure it might also help to better protect Google’s many brands from each other.
Google Life Sciences is now known as ‘Verily’, Google Ventures as ‘GV’ and Google X is now simply known as ‘X’. In each case the Google branding was either dropped or drastically deemphasized.
But let’s get back to Stripe Atlas.
It’s not too late for Stripe and Atlas
Launching a highly promising service like Atlas under the Stripe brand rather than on its own unnecessarily dilutes Stripe’s crisp brand positioning and its well established perception as payment processor.
On the flip side and maybe even more important keeping Atlas independent also would mean that Stripe’s brand is not diluting what Atlas stands for. This way Stripe is not unnecessarily standing in the way of what Atlas can become going forward.
Since it is still early days for Atlas it is quite easy to avoid the brand extension trap. Only a few slight adjustments would need to be made.
I think renaming all instances of ‘Stripe Atlas’ to just ‘Atlas’ and moving the content from stripe.com/atlas to its own website is about it.
If you want to learn more about brand positioning I can highly recommend ‘Positioning, the battle for your mind’ by Jack Trout and Al Ries. It includes countless examples of how brand extension can go wrong.
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