Dell Made $6.5m Using Twitter… But That Has Nothing To Do With Small Businesses

twitterPay particular attention to this post if you’re a small business owner and want to use Twitter to make more money. Dell has been claiming that they made over $6 million using Twitter, but does that statistic validate Twitter’s marketing power to the world outside of billion dollar corporations? I contest that it isn’t the case by looking at the numbers below.

There have been numerous claims of Dell making 2-6 million dollars using Twitter.

This is where the story ends for most ‘social media gurus’. They started claiming: “Dell is making money off Twitter!” So, if Dell can do it, anyone can!” Mainstream magazines started suggesting that small businesses consider using Twitter to make more money. I’ve even heard claims from some Dell representatives recommending Twitter as a marketing tool for all other small and medium sized companies in order to “increase revenues”.

These recommendations would be sweet if they stood the test against reality.

Dell Made $6.5m using Twitter for the past 2 YEARS

That would be roughly around $3.2m per year. Okay, so let’s suppose Dell made $3.2m using Twitter in 2009. Dell’s revenue in 2009 was 61 billion dollars. Conclusion: Revenue from Twitter was 0.01% from their total revenue ($3.2m is around 0.01% from $61 billion). “Hey small businesses, Dell made 0.01% of their revenue from Twitter. You can do the same!” :)

Another big problem with the revenue claims is the way they measured it. They seem to have measured:

  • The referrals that came from Twitter.com and bought something on Dell.com
  • The people who bought products using the exclusive coupons Dell posted on Twitter

There are many problems here if you want to take the Dell case study and advise small and medium businesses to use Twitter:

1. They didn’t tell whether the people who bought products from Dell were already existing customers i.e. whether they bought some products from Dell in the past. Let’s say if 80% of those who bought via the exclusive coupons or came from Twitter.com as a referral were existing customers. What happens then? You can’t really recommend for small businesses to use Twitter then if a decent portion of their existing consumers aren’t already on Twitter.

2. Twitter is a communication medium. Thus, it’s very misleading to claim (many mainstream newspapers said this) that Dell made money from Twitter. The best way would be to say they made money using or through Twitter. For the coupons, I have no idea whether they measured whether people have taken those coupons on other sites (online forums etc.) This was probably the case. So what? If you recommend small and medium businesses to go on Twitter and make $$$ then you should take this variable into account. Small businesses usually don’t have a lot of people that will take the exclusive coupons they post on Twitter and get them on other sites.

Here is the main thing most people get wrong:

A SMALL BUSINESS IS NOT A LITTLE BIG BUSINESS

Marketing usually differs a lot for a small and a big business. Compare Nike which runs brand commercials all the time with some small shoe shop. What is the small shoe shop decides to do the same? They’ll probably waste their money. They are much better off using something where they can see measurable benefits instead of going with branding.

The same thing applies online. As a small or a medium-sized business, focus on measurable activities first (and as we’ve seen, using Twitter is not really a measurable activity because there are so many variables associated with the Dell case study). If you don’t know how to measure online, this blog might help.

Why did the media create such a big buzz around Dell story?

For several reasons.

- Twitter was a hot topic around that time. The media published almost everything that had to do with them. There was a buzz that you can make money with Twitter but no example of a small or a big company doing that quite successfully. So when Dell published this story on their blog, almost all media outlets picked it up without critically analyzing it.

The second reason:

- I’m noticing one very interesting pattern. Everything that involves ‘relationships’ (social media, communicating with customers) tends to be examined with a very uncritical eye. Maybe that’s because ‘friendship’ and ‘relationships’ are some of our basic needs? Maybe people do that just because it sounds good and feels good? (but doesn’t necessarily works for everyone).

After all, going on Twitter and ‘building relationships with your customers’ sounds much better than ‘build a product and market it to a potential audience’? It’s an interesting thought.

Theodore Levitt and his Marketing Myopia principle says to me clearly that people go on Twitter to socialize not to look for products.

Action points:

If you’re a small or medium-sized business, go on Twitter and try it out for 7 days. See if you find it useful for communicating with potential customers, maybe working on projects and so on. I recommend you don’t consider it as a major part of your business strategy because there isn’t still any significant proof that Twitter has a big ROI compared to other mediums like PPC or SEO.

About the author: I’m currently writing for FinderMind magazine, a people search website.

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