Social Media Investment Contributes to Financial Success?

Sarah Perez quoted a WetPaint and Altimeter study in her article on ReadWriteWeb which claimed that heavy investments in social media contributes to the financial success for a number of companies in 2008, including Starbucks, Dell, eBay and Google.   This became a hot thread instantly.  People disputed the claim that these social media “mavens” were financially successful because news reports seemed to say that they were suffering in the downturn.  This post will pull some real numbers to inject some facts into the discussion.

I actually thought the authors of the study did some good work in setting up a framework to evaluate social investment by companies.  Whether you agree with the framework or not, there is something concrete that you can review and comment on.

As for the financial performance part of these maven companies, let’s take a look at Starbuck’s net income by quarter for one calendar year, compared to McDonald and Burger King’s:

Company  (Net Income in Millions) Q1 2009 Q4 2008 Q3 2008 Q2 2008 Q1 2008
SBUX (Social Media Maven) 25 64.30 5.40 -6.70 108.70
MCD (Social Media Wallflower) 979.50 985.30 1191.30 1190.50 946.10
BKC (not studied) 47 44 50 51 41

From a net income perspective, Starbucks essentially fell off a cliff after CYQ1 2008.  We read in the business press that they were taking drastic cost cutting measures and reinventing their business.  The claim that they were doing well despite the economic downturn is hard to substantiate.   In contrast, the more recession resilient fast food places like McDonald’s and Burger King seem to be taking the recession in stride.

Granted, this is neither a rigorous nor comprehensive analysis, but I feel it calls into question the conclusion that social media investment by Starbucks led to better financial performance despite the economic downturn.  Social media is an important part of customer engagement and brand building but I don’t think we have enough data yet to link it to the financial performance of a company.

Thoughts?  Flames?


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