Twitter? Priceless. Dell makes a million on Twitter? Meaningless.


As usual there is an *extraordinary* failure in the blogosphere to apply even the simplest reasonable business metrics to a minor event, in this case Dell’s million dollar Twitter “success”.

I’m a big fan of Twitter and think it’s great, but can’t abide the absurd valuation metric du jour which is hyping Twitter’s value based on Dell reporting that they had a million in revenue from activity via their Twitter presence.     Excuse me, but this is *trivial* news, suggesting if anything that Twitter is probably *not* a good base for  transactional economies.

Why the contrarian conclusion here?

People too often view revenue numbers as if they were profit.   Revenue is easy.  Profit is hard.   A million in revenues for a company that does many billions in revenue each quarter is not very significant – that million probably represents something like $50,000 in profit even if we assume the cost of the social media campaign was *zero*, when in fact it was likely … more than the profit from it.   Even if the ROI was positive companies like Dell can’t mess around with many new technologies if they only make Dell a few thousand extra in profit.

Even more importantly this silly “Twitter Revenue” metric is almost completely bogus.    This appears to be a count of sales that came in via Twitter rather than sales that were the result of some extra advertising activity at Twitter.   By this type of metric we’d value email infrastructures like Gmail, Yahoo Mail, Hotmail in the hundreds of billions or even trillions since so many economic decisions and transactions happen via email.  When GW Bush emails Henry Paulson to say “Hank,  throw 15 billion at the Auto Makers” do we chalk 15 billion up to the “email economy”.  Of course not.

Communication paradigms are very important but their economic implications are not to be exaggerated or conflated with real monetization programs – few of which have proven even modestly successul in the social media world.

Partly it’s simply because I’m being honest and not trying to hype the value of microblogging to advertisers.   I’m just calling this analytically which leads us to wonder how they could have done so poorly when Dell’s demographic matches Twitter’s suberbly. Dell’s volume is huge.  Dell’s got  a huge number of  Twitter Followers.  They are preaching and selling to a choir filled with existing and potential customers.

It appears the usually-insightful-but-in-this-case-opportunistic Fred Wilson has been trying to bump this “Twitters Millions” article around, perhaps because … he owns part of Twitter.    But I think Fred knows better  – if anything this is such a trivial sum it implies that Twitter – like most social media operations – is probably already overvalued by the Silicon Valley hype machine that you might remember suggested huge valuations for hundreds of companies that are now … gone and worthless.

Twitter’s here to stay and certainly has great value, but I’m skeptical they’ll find a great monetization model for the same reason Facebook is failing to find one – social media is almost exclusively about socializing where search media has a very large component that is very advertising friendly.    If you are shopping for cameras you are likely to go to Google to find out more information and you *want* to find camera ads in your search event.     This fact cannot be underestimated and forms the basis for most successful forms of internet monetization.   Perhaps a holy advertising grail will be found that’ll work for social media and/or video media but I continue to be as skeptical as I have been for years.

Disclaimer:  I sometimes write for Dell at the TechDirt Insight Community.

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About JoeDuck

Internet Travel Guy, Father of 2, small town Oregon life. BS Botany from UW Madison Wisconsin, MS Social Sciences from Southern Oregon. Top interests outside of my family's well being are: Internet Technology, Online Travel, Globalization, China, Table Tennis, Real Estate, The Singularity.
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7 Responses to Twitter? Priceless. Dell makes a million on Twitter? Meaningless.

  1. FoolsGold says:

    A comment from the Ignorant:
    I did not know Dell had some sort of ‘presence’ on twitter and do not now know just what is meant by that anyway.
    I agree that revenue and profit differ though obviously without revenue there ain’t gonna be much profit.
    I know that often a catchy phone number has value, so do fax numbers, 800 numbers, etc. Firms rarely mention any sort of ‘telephone presence’. What on earth is a Twitter presence?
    Twitter is letting Dell enroll followers? People actually follow Dell? Beats me.
    Valuation? Well, Dell ascribes value to it. So maybe Dell believes it. Ofcourse if others believed it, then others would have a Twitter presence as well and the value, if any, would be diluted by the competion’s presence.
    I send emails from time to time. Do I have an email presence? There is a guy in Nigeria who will send me seventeen million dollars in unclaimed funds. Does he have an email presence? Does it have any monetary value?

  2. JoeDuck says:

    People actually follow Dell?

    Twitter and also Facebook, where folks now follow their favorite “brands” for reasons I do not really understand though one of my few Myspace friends …. is Burger King…for reasons I don’t fully understand.

    My point is not that social media and branding won’t mix at some level – they already do – but that people need to get a better sense of scale when they are talking money math. This is a non-event, hyped by those who benefit from hyping.

  3. ian k says:

    how long before richard@dell shows up?

  4. FoolsGold says:

    If a gin manufacturer establishes a Twitter Presence, I will surely arrange to follow them. Otherwise I’ve no interest in following a commercial enterprise at all.

    Half the internet seems to be Hype about some latest stock, software platform or silly video. Hyped dollar values about such hype seems to be par for the course. Ain’t nobody going to really value all that hype so generously.

  5. JoeDuck says:

    FoolsGold you could join the nearly 7,000 people who follow Tanqueray on Facebook:

    http://www.facebook.com/pages/Tanqueray/10621412548

    This is a part of the mildly controversial new concept called “conversational marketing” where advertisers work with publishers and social sites to spark reader interest and product buzz. Unlike regular ads the idea is to bring the product into the dialog.

  6. FoolsGold says:

    One blogger recently attended a wine tasting event and thoroughly discussed several liqueurs and wines. It was not some sort of viral marketing and it wasn’t corporate sponsored, he just likes his booze and wrote about his experience. Now if something like that is concocted by the publicity department of the liquor importer that is different. Well, I don’ think I like those grass roots “front organizations” that sponsor political stuff and have really been created by lobbyists. So I don’t think I’ll like conversational marketing either.

  7. JoeDuck says:

    FoolsGold I think it’s getting harder to draw distinctions between information, analysis, opinion, journalism, commercialism. Although I agree that in the wine tasting example it would be different if it was spontaneous vs a PR ploy, the info might in that case have exactly the same value, so the question becomes how do we process that info. For me I’m more concerned about transparency than other factors. I’m OK with somebody blogging about an iPhone after they got one free, but want to know they didn’t pay for the phone they are discussing. Stock discussions, I think, deserve high transparency though TV seems only to do disclosures over the past few years. Hmmm – I’m now wondering if I have been transparent enough with some of my travel writing where I had free hotel rooms or meals and blogged about the experiences …..

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