Social Media Does Increase Revenues

by Niki Gomez in News on 27 July 2009 at 17:58

So, here’s the big one, does spending on social media really pay back? A fresh MBA graduate from MIT, Niki Gomez, passing through London and We Are Social on her way to Mumbai, gives her views.

At last, a study quantifies what many of us felt must be true, that social media does translate into increased sales. As Violette mentioned last week, a study by Wetpaint and Charlene Li’s Altimeter Group shows an extremely strong correlation between engaging in different social media and earning higher revenues. The study looks at the engagement of top 100 brands from the 2008 BusinessWeek/Interbrand Best Global Brands report and ranks them from 1 to 127, based on how they use social media channels. It finds that the top brands with their rankings in brackets are:

  1. Starbucks (127)
  2. Dell (123)
  3. eBay (115)
  4. Google (105)
  5. Microsoft (103)
  6. Thomson Reuters (101)
  7. Nike (100)
  8. Amazon (88)
  9. SAP (86)
  10. Tie – Yahoo!/Intel (85)

The most engaged brands experienced revenue growth in 2008 of 18% whilst the least engaged brands experienced losses of negative 6% over the same period.

Also interesting is that only arguably half of these are internet companies. The study categorizes the brands, a la Malcolm Gladwell, into mavens, those heavily engaging in 7 or more channels, such as Starbucks and Dell; butterflies, such as American Express and Hyundai who engage with seven channels but with less engagement; selectives who engage in six or less but do some on a deep level such as H&M and Philips; wallflowers like BP and McDonalds who engage with six or less but with a light touch. My question was whether social media pays off because of lower marketing spend, as there is a shift from spending on more traditional channels. However it seems, revenues, actual sales are up on previous years, even boom times!

Their findings conclude that it is not how many social media channels you use, but how deep that engagement is: so being social pays, but it’s the quality rather than quantity of these conversations that seems to triumph yet again. So, please think before you tweet… a good piece of advice for brands and individuals alike.

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  • armandoalves

    Charlene and Altimeter have done a great job, but are clear to state that there only is a slight CORRELATION and not CAUSATION between financial performance and social media engagement.

    These brands were already doing great customer service, had great products/services and were offering value even before social media was all the buzz.
    Add to that some sample bias, with lots of brands aren't even present on the index, and do get sound sales figures even if their social media engagement isn't that famous.

    Post-hoc arguments are one of the worst traps in marketing, and although in many cases there is an important contribution from SM, let's not mix the concepts.

  • http://twitter.com/Kunal_Kripalani Kunal Kripalani

    Here's a very relevant slide show to chew on. It looks at implementation right through to monetisation of the social media channel:

    http://www.slideshare.net/econsultancy/e-consul…

  • DaGood

    I agree with armandoalves, and Charlene Li herself: The study shows a correlation, not a causation.

    I could just as easily say that this study shows how far we are from proving ROI:

    The companies at the top in terms of financial performance are able to use more resources on social media, despite the fact that it has not yet been proven to provide a return on this investment.

    Even more clearly: companies at the bottom of the list – under more pressure to prove the specific return on every penny spent – are less inclined to use resources for social media.

    What will be interesting is that this may create a gulf, with the companies who are able to invest pulling away from the others who cannot justify the investment in difficult times.

  • oasisinteractive

    Great Post! Just got to know of your site. Great content you have here! We're actually a digital agency from Singapore. And just like you, we love to keep up with trends in the digital sphere and share information. :)

    We've followed you on Twitter and we're looking forward to more content from you! :)

    Good day!

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  • Spooky

    Will Niki Gomez be correcting this? If not, will you be using Niki again?

    As everyone else has pointed out, the evidence does not support the headline. It should have said:

    Profitable brands splash cash on Social Media

    No surprise there, becuase they can afford to experiment.

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  • Dino

    Overall, though it sees that companies can't reveal any solid data whether they are generating significant revenues through social media. As opposed to advertising programs, social media does not seem clear up to now how it can affect buying decision…

  • http://www.planetwebfoot.com/ Social Networking Software

    Measuring ROI through social media is one of the toughest jobs going. However given the proper amount of planning and a well thought out execution social networking can absolutely be a huge boon to a companies bottom line.

  • http://www.planetwebfoot.com/ Social Networking Software

    Measuring ROI through social media is one of the toughest jobs going. However given the proper amount of planning and a well thought out execution social networking can absolutely be a huge boon to a companies bottom line.

  • Pawankumar Sharma

    right now its just the tip of the iceberg on social media marketing and evolution.best days lie ahead!