Study: Social Media Pays
- by Mark Walsh @markfwal, July 20, 2009
One of the major hurdles to increased spending on social media has been lingering skepticism about what kind of payoff companies actually get from conversional marketing. In short, is it worth it? A study released Monday says "yes," drawing a link between brands' social media efforts and revenue growth.
The new research from social media platform Wetpaint and digital consulting firm Altimeter Group found that companies with the highest levels of social media activity on average increased revenues by 18% in the last 12 months, while the least active saw sales drop 6% over that period.
Among the top 100 brands reviewed, Starbucks came out on top with a score of 127, followed by Dell (123), eBay (115), Google (105), and Microsoft (103). Companies were scored based on the level of interaction across 10 social media channels including blogs, Facebook, Twitter and wikis.
The study found that social media efforts tend to build on themselves. "There is an exponential growth in the depth of engagement as the brand extends itself into more and more channels," according to the report, titled www.engagementdb.com.
Companies that scored well generally had dedicated -- if small -- teams focused on social media initiatives. The most successful of these evangelized across the entire organization to gain broad-based support and cooperation. And instead of taking a traditional communications approach based on messaging and talking points, they embrace a conversational mode.
The report sorted companies according to four categories, with "mavens" being the most aggressive brands in social media and "wallflowers" sitting on the sidelines. In between are "butterflies" -- companies that are spread to thin across social properties, and "selectives" -- those that excel by focusing on just a few channels.
Among industries, media and technology companies tend to be "mavens" while financial, food and beverage, consumer products and apparel brands were on the other end of the spectrum -- "which is expected given that companies in these industries are just beginning to experiment with social media," the report states.
Starbucks was the obvious exception in the food and beverage industry, beating out advanced media and tech brands. Among its most prominent social media efforts was last year's launch of MyStarbucksidea.com, a community site allowing users to submit, comment on, and vote on their favorite ideas for improving the company.
At the same time, Starbucks' financial performance over the last year does not seem to support the connection between a brand's social media activity and revenue. In its most recent fiscal quarter, the coffee chain's revenue dipped to $2.3 billion from $2.5 billion a year ago. It reports third-quarter earnings Tuesday, with analysts expecting revenue to range from $2. 3 billion to $2.5 billion.
A Wetpaint spokesperson said the revenue growth figure cited in the study is an aggregate of all the "mavens," and not a reflection of just one company.
Runner-up Dell gained wide attention for ramping up its social media programs to combat the "Dell Hell" label applied by critics to its customer service operation. The computer company now boasts a more than 40-person social media team that runs blogs, a video channel and other forums as well as tracking what people are saying about Dell.
In conjunction with the study, brands can also find out how their own social media efforts rate through the new engagementdb.com site. After taking a brief survey, companies will get an email evaluation telling them how they rank against the brands covered in the report.
It seems to me that making the correlation between social media use and increased revenues is done so in a vacume. I would argue that the companies using social media the most are doing so because they have a clear marketing strategy that is being executed through focused campaigns... of which social plays an important part no doubt, but to say that social is the CAUSE seems misleading. The inverse seems true as well: ill defined strategy + unfocused campaigns = no idea of how to use social effectively.
I agree with Trevin. The causal relationship here is not apparent. Even so, I do not doubt that social media tactics are a positive addition to most marketing strategies. It's just that all the studies I see explore very large companies' success with these tools. How are small businesses utilizing social media?
This isn't a study, it's a sales piece.
Brands get a high rating if they do a whole lot of different things (Facebook, Twitter, Flickr, YouTube, Wikis, crowdsourcing blogs, etc etc etc).
The analogy is a Kool-Aid stand ranking people by how much Kool-Aid they drink; they're conflating activity and success.
On the plus side, the "study" is helpful as an overview of which brands are active and what headcount is required.
There's nothing wrong (or new) about salespeople hyping their product or service as the next miracle cure for what ails you. But, caveat emptor.
Although it's hard to judge the study methods from this article (vs. reading the study itself) I have to agree with the other commenters in that there are an awful lot of moving parts involved in these big brands when one's looking for causal relationships. I have the utmost respect for Altimeter, and no doubt the data and conclusions offer valuable insights. But any conclusions can only be extrapolated so far. To take Starbucks as an example, it's impossible to conduct such a study and also eliminate (or adjust for) the fact that Starbucks is a household name. How can that fact *not* have a bearing on their social media results, just as it does every other type of marketing metric?