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New Study finds correlation between Social Media and Financial Success

Many individuals, companies, and non-profits I work with ask, “Should I setup a facebook profile for my company? Won’t it be a time suck? Is it really worth it?” The bottom line for many of my clients: they are worried about spending more time on the computer, and less time on running their company.  A recent article on ReadWriteWeb delves into this very issue.

Personally, I think it’s quite simple. If you’re actively producing online social media (participation on facebook, twitter, etc.), you’re already more engaged. And if you’re more engaged with your customers, clients, and audiences, financial success will follow.

One of the more interesting “discoveries?” Companies had more success when deeply engaged on a few sites than lightly engaged on many sites. “It’s not about doing it all, but doing it right.”

Read the full article below for ReadWriteWeb’s summary of the recent study:
[originally published on ReadWriteWeb]

A new study released by enterprise wiki provider Wetpaint and the Altimeter Group shows that the brands most engaged in social media are also experiencing higher financial success rates than those of their non-engaged peers. To determine this relationship, the study focused on 100 companies from the 2008 BusinessWeek/Interbrand Best Global Brands survey and the various social media platforms they used like Facebook, Twitter, blogs, wikis, and forums. Although it’s difficult to prove for certain that the companies’ involvement in social media has led to their increased revenues, the implication behind the new data is that it has.

After examining the companies and their social media activity levels, the brands were ranked on an “engagement scale” where scores ranged from a high of 127 to a low of 1. Those brands that were the most engaged saw their revenue grow over the past year by 18% while the least engaged brands saw losses of negative 6%.

Four “Engagement Profiles”

The study grouped the brands into one of four engagement profiles that related to the number of channels they’re involved in and how deep that involvement is. At the top of the list are “mavens,” the brands heavily engaged in seven or more social media channels – like Starbucks and Dell, for instance. “Butterflies” are like wannabe “mavens,” and are also engaged in seven or more channels but are spread too thin, investing in some channels more so than others. “Selectives” focus on six or fewer channels but engage customers deeply in the ones they’ve chosen. Finally, there are “wallflowers,” or brands engaged in six or fewer channels with below-average engagement; these include companies like McDonalds and BP.

Out of the top 10 brands engaged in social media, the mavens dominate the list. All of the top 10 are mavens and have seen financial success even in a down economy:

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)

$$$ Does Social Media Pay? $$$

Of course what everyone really wants to know is whether or not social media actually pays off in terms of dollars and cents. This study seems to show that it does. The most-engaged brands are significantly outperforming their peers across numerous industries in both revenue and profit performance. They have even sustained strong revenue and margin growth in spite of the economy, notes the report.

Whether this correlation is actually a causation cannot be proven with the data on hand, it can only make the implication. Given the large number of companies analyzed and the consistent findings, it seems probable that social media has had a major impact on the companies’ financial success.

It’s also worth noting that the level of engagement appears to be a factor, too. The companies deeply engaged in fewer channels (“selectives”) delivered higher gross and net margins than those only lightly engaged in more channels (“butterflies”). It other words, as the report says, “it’s not about doing it all, but doing it right.”



Along with the complete study, available here, an accompanying web site has also been launched at www.engagementdb.com. On the site, companies can compare their social media efforts with the top 100 cited in the report. They can also opt to detail their social media efforts for inclusion in the online database at the site for future research and study.

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