They are constantly changing numbers that can make or break your business, driving leadership to distraction — in fits of ecstasy one day, in near-despair the next. Worst of all, they’re not even under direct company control. Yes, they’re impacted by internal decisions, but they also ride the waves of sometimes inexplicable public opinion and confidence, telling a story as they almost appear to be making one up.
Stock figures or social media metrics? Interestingly similar, aren’t they?
As recent bubbles have reminded us rather painfully, markets have a huge psychological component — based on both fact and a kind of group meaning-making. Rumors and stories can drive the biggest variations (witness AT&T’s stock price drop when the Verizon iPhone was still just a possibility; or the fears on display today for Apple), with very real financial implications as a result. Low investor confidence means lower stock price, which means lower market cap. And in a loan-fueled business climate, that lower market cap means decreased operating cash flow, spelling both gloom and doom. So in a few short steps, words and perception become dollar signs.
Now switch to the world of social media. Everyone is going berserk trying to come up with a way to judge whether or not social media is worth the effort (and time and money); that’s the real story behind all the ROI guesswork. As I wrote back in December, strict ROI for social media is a fool’s errand, but that doesn’t make it worthless. Actually, the more I think about it, the more social media success reads as a reputation metric — much like, in many ways, that stock price.
So is there a deeper connection between social media and the stock market? Can the product of customer engagement be seen on the exchange floor? I spent some time this (holiday — ha) weekend looking into some of the most engaged brands to see if it’s possible to track social media work against stock price. With the requisite boatload of responsible caveats (potentially inverted causation, correlation v. causation, multiple other possible factors), the results are extremely interesting.
I looked at four companies in very different markets: Ford, Whole Foods, Dell, and (somewhat surprisingly) Apple. (To keep posts manageable, I’ll hold the Apple and Dell discussion for later in the week.) The story that emerges from my charts and article searches can be summed up in a line: online reputation seems to trend with stock price. Further, that connection may be stronger when the company’s focus is on the customer relationship/experience, rather than on sales.
Ford
By early 2009, the outlook at Ford was grim. Stock prices were stagnant (hovering around $2), and the ailing giant’s $7.1B market cap was a pretty depressing sign of investor opinion. Fast forward to early 2011: with stock prices nearing $20 a share, and a market cap of $64.7B, clearly something at Ford pulled a 180. Consider this chart of Ford stock prices, with red flags indicating major social media events (from left to right):
Whole Foods
Having hit a stock price high in December of 2005, Whole Foods trended mostly downward for the next three years, bottoming out at around $8 per share. But from that low, there’s been steady growth — kind of shocking for an expensive grocery store in a bad economy. Is it sheer coincidence that Whole Foods began a social media reinvention in late 2008, becoming by mid-2009 a poster child for social engagement, now with over 150 Twitter accounts (with a 90% engagement/conversation rate) and 97 Facebook pages?
- January 2009: Whole Foods has 1 Twitter account, 16,000 followers
- Spring 2009: WF has 40 Twitter accounts by May
- June 2009: WF releases 1st iPhone app
- August 2009: WF releases 2nd iPhone app
- February 2010: The original WF Twitter account reaches 1.75 million followers
Again, I’m not suggesting direct causation, but these charts are telling me the outlines of a story — a story about brand awareness, customer engagement, and investor confidence. Could it be that the real impact of social media success will be seen on the stock ticker?
Tune in on Thursday — same bat time, same bat channel — to see what the chapters on Dell and Apple add to this tale. Hint (and score for Kant): Intention may be the key.
