Does Social Media Marketing Even Work?

I was pondering a post with a central hypothesis of “social media marketing only works on the margins”.

Essentially, if a company’s marketing comprises social media tactics (monitoring, joining and leading the “conversation”) it will make no bearing on customer’s choice to choose that organization; but when faced with a choice of choosing between two similar companies, one of which has adopted social media and the other that hasn’t, the customer, stakeholder, business partner, whatever will chose the one with a strong social media component.

However, doing some research proves this (initially) to be false.

I took Dell and HP, partly because they seem to do broadly the same thing and partly because I’m fairly sure neither of them are FH or iStudio clients. Dell, as is well known, has a strong social media element to its marketing after being hammered in the blogosphere. HP, while having a prominent blogger as a high-ranking executive, hasn’t seemed to have embraced social media as enthusiastically.

So I thought this would be a good comparison. I would also be able to use stock prices to compare which company was more “successful”.

Using the NASDAQ comparison tool, I found that HP’s stock had actually outperformed Dell’s by some margin over the past three years:

Dell HP Stock Charts

Hmmm, interesting. Maybe HP simply has its fingers in more pies, than Dell. But what about in searches. Dell is a consumer facing organization and therefore, with the amount of social media it touches, must outperform HP on searches. So I turned to Google Trends to validate this suspicion:

Google Trends

Again, hmmmmmm.

So, does marketing through social media work at all? This cursory, back-of-a-napkin experiment would imply not (although there are tonne of things I haven’t taken into account in this analysis).

So why are we getting all pent up over this sort of thing?

Sidebar: If Dell and HP don’t “compete” I’d be interested to hear who would be a fair comparison.

10 Responses to Does Social Media Marketing Even Work?

  1. Scott says:

    Because social media marketing is in its infancy. I think the big word here is “potential”. While there’s no way social media marketing would have an ongoing influence on a company’s stock price today (or ever – as you mentioned, there’s many different factors that have to be taken into account. Just because someone blogs doesn’t mean your company’s stock is going to sky rocket…), it has the potential to have a much stronger influence somewhere down the road…..hence the marketers getting all ancy in their pantsy.

  2. Leo Bottary says:

    Interesting post, but I’m not sure it’s conclusive in the way you suggest. You can compare social media strategies, but you can’t isolate them in a manner that allows you to draw such broad conclusions. There are too many other factors that contribute to the results you’ve cited. I also believe you’ve compared successful companies that happen to go about achieving their success in different ways – ways consistent with their brands. For example, blogging isn’t for everyone no more than participation in an on-camera TV interview. Some have the ability and temperament to pull it off and others don’t. Companies have myriad tools today. They are smart to use those that play to their strengths.

  3. Colin McKay says:

    I think Scott identified the problem with your analysis, Ed.

    Stock price isn’t a measurement of your “relationship” with your clients or the health of your product portfolio.

    If you want to measure the comparative strength of marketing tactics, you should measure across results: revenue, units shipped, market share divided across demographic and market segments, that sort of thing.

    As well, your analysis falls victim to the common conceit that only social media tools are responsible for gains in “conversation”: what about the 1000s of B2B salespeople and systems consultants that actively seek out conversations and actually develop proposals to address customer problems?

  4. As noted by previous comments, too many variables.

    I recently attended a 2.0 seminar put on by PR Newswire that attempted to put a monetary value to social media efforts. Post here: http://cparente.wordpress.com/2008/03/10/the-world-of-20-according-to-pr-newswire/

    You mention Dell’s problems in the blogosphere. The presenter claimed that negative online comments declined 60% over one year after Dell started responding to every one with an email apologizing and offering some kind of redress. But this percentage wasn’t cited, so I didn’t include.

  5. Hi Ed,

    Interesting comparison but I think it runs into several things that are not controlled for, making the cause and effect linkage a little difficult. For example, the majority of Dell’s revenue and business is providing hardware and services to other businesses. Our consumer market business is smaller and not as broad a product offering as HP (think cameras for example). Therefore, google search numbers could be skewed by this fact, in addition to the overall size of the HP business compared to Dell. Dell’s roots are in business-to-business markets, not consumer.

    With respect to your hypothesis, I know of one or two situations where we lent a hand to bloggers having trouble with their HP machines and the individuals became Dell customers; you can search and find previously unhappy Dell customers who remained Dell customers because of our efforts; and, their are various individual stories on the web of people buying Dell because of our involvement in social media. However, that doesn’t put together the macro hypothesis you are looking for, I suspect.

    Chris, just to clarify we do not respond to blog comments with email, we are listening activley to people using social media and join conversations if we think we can bring value and contribute. I think the commentary % you are referencing is that when we started our engagement with bloggers we found that 49% of the conversations were negative and a year later that was down to the low 20% range.

    Hope that helps

  6. David Jones says:

    Ed, I applaud you for taking some sort of analytical look at this stuff vs. just all the “join the conversation” wankery that goes on. While I’m no MBA, I’m not going to disagree with any of the points made by the commenters before me, but I will point out that if these graphs went in Dell’s favour, there’d be a whole bunch of people who’d use those lines as a proxy for social media success.

  7. wmzpc says:

    HI Ed,

    Curious to know what your opinion on this topic is now.

    BTW, wrt. your analysis, looking at search volume only as a measure of awareness for a brand is not kosher.

    Search volume is an indication of the gap between supply of quality information and demand from consumers. Therefore #of blog mentions and “influence” is the better measure I don’t have a measure for that yet.

    Thanks,
    PC

  8. ried says:

    I don’t get it. Everyone seems to think this is the next frontier of marketing. Perhaps it just hasn’t evolved. I’m fairly plugged in to a number of social apps, programs, blogs, pages and I don’t see any results. Sure, you can make money telling and charging clients they need this and that, but does it increase their business? Not as far as I can tell.

  9. Forrest says:

    I’m not surprised by this study, though a year old now. I think the case is valid in certain aspects, while ignoring other important factors. If you’re trying to answer whether it really works or not, the answer is it does… but very rarely.

    Social media marketing has it’s place, with the right MEDIA. My guess would be that Dell did not use social media in the “proper” way. Social media is best used virally… and for it to be viral, you better make it something that many people want to share. The best examples of what works is an entertaining video, or a fun game, while still promoting your site or product. I don’t recall Dell coming out with anything funny or fun for that matter, which would prompt me to share.

    Think of it like a great joke you want to tell your friends. The MEDIA is the joke, and if its good, you are likely to share (if you remember it). Likewise however, say the MEDIA is a new pair of running shoes, are you likely to be excited to share with all your friends like a good joke? Probably not. I can’t remember the last time I talked about my running shoes.

    Another everyday example most of us can relate to… I’d be willing to bet one of the most popular EMAILS to share with/forward to your friends is a funny one. How often do you open a business solicitation email (called junk for a reason) and forward it on with high praise?

    Getting back to my point. WHAT MEDIA ARE YOU USING TO PROMOTE YOURSELF/PRODUCT. There are two aspects to the words social media. SOCIAL and MEDIA. SOCIAL is easy if you have the right MEDIA. If you don’t then don’t waste your time.

    I think at the end of the day when it comes to social media advertising, it’s like any other advertising medium… tv, radio, print, etc. They all have their place, and some work better for certain industries or products than others. There is just simply too much hype over the social media markets right now… but eventually all bubbles pop. Spending too much time in this market in your business could be like spending too much money on a home… and we all know where that can lead.

  10. […] Social Media Marketing Even Work? Redux A couple of years back I posted a side-by-side comparison of DELL vs. HP’s stock prices to see if social media marketing was any indicator of success. My thesis  was that if social media […]

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