Dell and $3 million in Sales via Twitter... Who Cares?

Social Media Marketers all over the Internet are drooling over themselves at Dell's claims that they made $3 million dollars in sales via Twitter all for $0 cost. They're using these stories as testimonials to convince big brands that social media marketing is right for them. Statements like "Twitter Earns Brands Millions - For Free" are typical of their claims.

Dell's Stephanie Nelson blogged in June 2009 that: "Since we started back in 2007, we've earned more than $2 million in revenue at @DellOutlet attributed directly to our Twitter activity," and "If we factor those new system purchases that come from @DellOutlet, we’re actually eclipsed $3 million in overall sales."

Quotes from other sources also claim that "Dell now has a string of accounts and 200 staff use the site to talk to customers."

You don't need to be a statistics professor (or any kind of scientist for that matter) to blow enough holes in this story to make it seem not even worth mentioning, let alone turning it into rocket fuel for social media marketers.

The first huge problem with using these claims that Twitter is a successful marketing tool is that Dell doesn't give us any insight whatsoever into what metrics they're using to determine whether or not Twitter was actually the source of the sales. So for all we know, the numbers are just made up by their social media marketing department who could be trying to defend their jobs. Stephanie claims the sales are attributed directly to their Twitter activity... really? How? It's likely via redemption codes posted on Twitter, but see some statistics and conversion rates.

Secondly, Dell earned approximately $13.6 billion in revenue in 2009. Now if we believe the accounts that Twitter brought in $3mil over two years (June 2007-June 2009), that's approximately $1.5 million per year. When compared to gross annual sales, that's approximately 0.01% of total annual sales. I don't want to scoff at $1.5 million in sales, but I know individual sales people that sell that much product in one year. In some cases, one or two commercial accounts will gross that much. So, in reality one or two customers could have accounted for all of those sales. Either way, shareholders and investors aren't going to dance a jig for 0.01% in sales.

If it's true that 200 employees use Twitter to talk to customers and we conservatively estimate that each of the 200 employees uses twitter for 15 mins a day, 5 days a week, that amounts to about 50,000 person hours a year (which could be vastly underestimated or grossly over estimated). Next, if you guess that each each person earned an average of $20/hr that's about a $1 million in labor costs per year against $1.5 million in revenues. It certainly wasn't ZERO cost to earn the $1.5 million. Of course all of these figures are highly specious and total guesses.

Lastly, I have no idea of Dell's end to end COGS (cost of goods sold) but since the 2/3 of the sales were sold on the Dell outlet, we can assume a pretty low profit margin. In any case, COGS would certainly have to be less than 30% to even break even if those labor figures are even close to correct.

In any case, the rationale behind these claims that social media is earning brands millions at zero cost is dubious and completely incoherent from a logical perspective.

This is another case of social proofs emerging in this industry, where lofty, wispy, prophetic claims are made by individuals with no statistics or empirical criteria to back them up. This somehow spawns a media frenzy and complete blind faith trust in social media as a marketing tool. There's far too much bathwater drinking in this Industry and not enough critical analysis.

I'm also going to go out on a limb here and say that Dell's experiences with Twitter are going to be light years removed from Joe Average's business experiences on Twitter. For a company like Dell, Twitter is merely an extension of a multi million dollar international marketing budget that capitalizes on Dell's existing mindshare and brand equity. All of Dells followers have heard of Dell before as a result of spending by other marketing departments. Joe Average trying to accomplish the same thing is going to fail miserably. Getting a million followers on Twitter didn't "just happen" for Dell. It happened because of the cumulative effects of years of marketing, advertising and brand recognition. When Joe Average tries it, all other things being equal (product performance, price point, etc) he won't succeed as well because he doesn't have the massive reach and marketing and advertising that Dell does via other channels and mediums.

Additionally, when you tell people; "come follow us on this channel and we'll offer free coupons and discounts" doesn't imply that the medium was successful. It implies that your message was.