Having considered the social media stories of Ford and Whole Foods in Part 1, you might have spent yesterday buying as many Twitter followers as you could and waiting to see your stock price climb with your Klout score. But good lord, I hope not.
While that obviously very shallow consideration did seem to indicate some trending between social media engagement and stock valuation, my other two case studies — Dell and Apple — refine the point substantially: as online reputation grows, stock prices seem to follow.
Dell
In 2005, Dell entered “Dell Hell,” an excruciating period of castigation by the rising caste of bloggers and (shortly thereafter) established media in response to, well, lousy products and rotten service. By 2009, the company had earned a reputation as one of the success stories of social media, attributing $6.5 million in sales to their work on Twitter alone. A major turnaround, yes, and the stock price has improved from its March 6, 2009 low of $8.37 per share. But is the January 18th price of $13.78 an achievement worth writing home about — especially when you consider that they entered “Dell Hell” up around $40 per share, and have, for the most part, been in decline ever since?
So does that picture knock a hole in my stock price/social media theory? Not necessarily. Dell has become deeply involved in social media platforms, but the result has been a bunch of sales, not a flood of brand love. (The results of a search for “dell quality” should still make Mr. Dell a bit nervous.) Dell’s social success story is almost always told in terms of revenue, not reputation. Perhaps long-term relationships and confidence are the social media – stock price connection.
Which brings me to…
Apple
What is the most significant company to have absolutely nothing to do with social media whatsoever? Ding ding ding. Apple has no Twitter account, no Facebook page, and is, in fact, notorious for not sharing. Products are kept under a secrecy blanket (misplaced iPhone excepted) until official release dates, and company news hits the headlines when and how Apple says so. (Consider this week’s announcement – on a federal holiday — of Steve Jobs’ latest medical leave.) In some sense, it is a terribly antisocial company.
And yet. Apple is both the enabler and the subject of a tremendous explosion of social media interaction. Twitter’s own review of trending topics for 2010 placed “Apple iPad” #6 overall, with four Apple products (“Apple iPad,” “Apple iOS,” “Apple iPhone,” and “MacBook Air”) making the top ten for technology terms. This without any seeding, deals, or social media campaigns from the company itself. What on earth is Apple doing in my survey?
I would suggest that Apple’s brand is social, even if the company itself is not. With an intense — actually, obsessive — emphasis on the customer experience consistently driving everything from device design to Apple store layout, Jobs & Co. have launched a customer cult of brand ambassadors, propelled by sheer satisfaction. No, Apple doesn’t have a dime of Twitter revenue to display, but they have a reputation that has inspired customers and investors for a good decade, and driven a huge social discussion independent of company efforts.
That would mean that the real story here is buzz — earned, encouraged, or both.
Conclusion
So is social media engagement a stock price indicator for everyone? Clearly not. Some companies sell social, some companies are social, and some companies haven’t got a clue. But for those who place primary emphasis on how their customers feel about their brand (interesting — that’s PR), I do think we can connect the dots between social presence and investor confidence. One more chart, and then no more, I promise.
Look at the upward trajectory of Apple, Whole Foods, and Ford, as opposed to the near-flatline of Dell. (And for anyone wondering about Ford, remember: Ford sells a reputation — it’s the dealer you buy a car from.)
This question requires a much more thorough inquiry, so I encourage anyone to poke holes, criticize (constructively), and just generally discuss it. But if this idea holds any water, and we can draw a clear line between successful online buzz and something as valuable as market cap, maybe we can put the ROI question to bed — with a stiff drink.
