City A.M. caused controversy yesterday as its front page story “Market Influencer” reported that UBS had become the first bank to “… factor Instagram influence into its ratings.” A correlation was drawn between the organic sales growth of companies and social media hype. Are analysts really using what UBS call “social media heat” to rate the performance of companies? I hope not.

City AM, Market Influencer headline

Initial excitement that a front page story in City A.M. that profiled the importance of social engagement swiftly became dread. Later that afternoon I going to run a workshop for a FTSE 250 financial services company, so it was quite easy to visualise this story being held up elsewhere as an example of best practice.

People on the internet may be engaging with your company, your Instagram feed may be full of likes and comments, but the idea that brokers use this data to make financial decisions is dangerous. Here’s why.

To take a snippet from the story,

“According to UBS, the correlation between Italian fashion brand Gucci’s organic sales growth and the year-on-year increase in Instagram likes per post is 76 per cent.”

The next sentence implies that because challenged companies such as New Look and House of Fraser do not fully engage with their online customer base, it’s of no surprise they’re in financial difficulty. The story ends noting that MiFID II has meant brokers have had to look for alternative ways to research companies.

What the piece doesn’t explain is some core truths about social:

#1 Aligning social with sales isn’t easy

When aligning social media channels to the sales funnel, generally content is used to raise awareness first. With paid-for support, it’s 100% possible to drive sales using Facebook or Instagram’s fancy new shoppable tags. Although building social organically (this is key) to naturally generate revenue isn’t straightforward.

Therefore to correlate social engagement with business performance is just that; correlation does not mean causation. Haven’t you read Thinking, Fast and Slow?

#2 Chasing followers is not a social strategy

Could the City A.M. piece cause a mad panic for the world’s largest brands to chase followers? I hope not. We should be past this. Social media should be one part of your PESO strategy. Followers are one metric, but shouldn’t be used as a standalone indication of social performance, let alone business performance.

#3 Paid-for boosts and bots

Any corporates running social media programmes will realise the importance of paid-for tactics. Particularly on Facebook where organic reach amongst your own fanbase is just 2% and advertising rates have risen by 35%. Paid-for will drive follower growth, engagement, and click-through on posts (as long as the content is right).

Surely such tactics could be used to manipulate the overall social engagements of a corporate to appeal more favourably to analysts? What about companies who choose to purchase fake followers to elevate their profile numbers? So many questions…

 

Corporates will find social media provides valuable opportunities to build relationships with their audiences. However, this will rely on an engaging narrative and a strategy that doesn’t just work across social media, but the entire marketing mix. Social media isn’t a direct indication of financial performance.

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