Does 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 marketing did truly work, DELL (who at the time was heavily invested) would have seen a larger relative increase in its overall value vs. HP who technically is in the same competitive set but who was not as invested in SMM.

While I labelled the post as a “back of a napkin experiment”, the response from the community was less than positive:

Colin McKay

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?

Scott McDonald (now training as an accountant)

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.

Leo Bottary

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.

RichardAtDELL made some excellent observations, from the inside

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.

David Jones was a little more supportive of the framework, if not the methodology

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.

Just like when I was reviewing the comments, I don’t want to jump in point-by-point but I will say that I believe the philosophy behind the experiment holds true – that success is ultimately measured in shareholder value over time. Yes there are way (way) too many controls I should have accounted for and never will be able to but the theory of measuring shareholder value as the ultimate indicator of success is, I think, valid. In fact, it wraps up all of things Colin points to as things to count in one umbrella piece, determined by market forces.

So a few years on, has anything changed? Can we now use those lines as proxies for social media success?

DELL’s stock price has overtaken HP’s (although they have run neck-and-neck for a few years now) but the search volume differential remains similar. Has the question moved on from “does social media marketing even work” to “does social business even work?” It feels as if DELL is a more social business thatn HP and has started to reap the rewards of that. An Altimeter and Wet Paint project shows that “companies engaged with social media enjoy higher revenues and profits than their peers…across all industries”…and higher revenues and profits would, if my A-level economics serves me correctly, translate into a higher value in the stock market.

Dell vs HP stock valueI happen to believe strongly that social media marketing does work – but that we are still trying to find the right metrics to measure its effectivenes. We know that a better relationship with our customers is a desired and attainable outcome from this type of marketing but can’t but a dollar value on it. We also know that marketing has to have an effect on the bottom line – either to reduce costs or increase sales. Perhaps this doesn’t happen immediately, as my original post may have thought, maybe the relationship a brand builds with its customers, just like the relationships we build with out friends in real life, happen over years, not months or days.


One Response to Does Social Media Marketing Even Work? Redux

  1. David Jones says:

    It’s a tough one. Isolating any one channel and drawing cause and effect is always full of holes.

    A company like Apple has done it with fewer products, very little (zero?) involvement in social media marketing, and I’d hazard a guess on a fraction of the ad budget of those behemoths.

    It’s worth exploring the value and ultimate effect social media participation has on brands, but it’s very complex and we should resist simplifying. Michael Cayley’s work on social capital value add is interesting to read, but still too esoteriorgor most marketers.

    This stuff is only one input in the marketing mix. An important one that can make a difference, but we need to be careful celebrating the examples of “I bought this because I heard about in on Twitter” because we could still easily find 10 people in a blink who’ve never heard of Twitter.

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