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.