RonAmok!

The adventures of an analog engineer and digital storyteller who studies emerging networks and their impact on the great game of business.
Aug 21, 2012

Yesterday, I got an email from NewBlueFX, a company that creates plugins for nonlinear video editors like my favorite, Sony Vegas. The email, entitled, “You Determine The Discount Sitewide Sale” described an interesting social marketing campaign that promised a one percent discount for every retweet of its message, with a sixty percent cap.

Here are the rules from the email:

  • The Tweet-a-thon starts Monday August 20th at 12:00AM PT and goes until Tuesday 11:59PM PT.
  • Total Tweets and corresponding discount to be announced Wednesday morning 7AM PT.
  • Discount can be used on any product available on NewBlueFX.com
  • Wednesday’s sitewide promotion expires Thursday, August 23rd at 7:00AM PT

I love this campaign from the standpoint that NewBlueFX clearly sees its audience as an asset. It also gives us the opportunity to play with some math to calculate potential dividends that the company is seeking to extract from those assets.

The company’s Twitter account, @newbluefx, has 928 followers (the asset). Due to NewBlueFX’s niche product line, this audience likely consists of specialized video artists who’ve made significant investments in sophisticated video editing software. Since like-minded people tend to follow each other on Twitter, NewBlueFX is betting that by encouraging its audience to spread its messages through their networks, that the message will ultimately find its way to the right people as opposed to (as traditional media offers) the most people.

The company has done something else by offering a discount for each retweet…it has established a retweet price.

Consider that the NewBlueFX online catalog contains 26 products, whose:

  • Average price is $127.64
  • Median price is $129.95
  • Mode price is $129.95
  • High price is $299.95
  • and a Low price is $49.95

By taking the median price of $129.95, New BlueFX has established a price of $1.299 for every retweet (1% of the median product price) its campaign generates–up to a cap of 60 retweets.

The model gets even more interesting if you compare it with advertising through traditional media. By capping its discount (and therefore the amount it is willing to pay for the entire campaign), any retweets generated over 60 will drive the effective cost per impression down–the opposite of what happens when purchasing traditional advertising.

Social vs. Traditional CPM

If the average Twitter user has 126 followers, each retweet has the potential to be spread to 60 x 126 = 7,560 people. Therefore, NewBlueFX has established that it is willing to pay $77.94 (60 x $1.299) for access to its audience’s audience. Had NewBlueFX decided to invest that same amount of money in someone else’s audience (traditional media), similar access would translate into a CPM (cost per thousand impressions) of $10.31 (1000*($77.94/7,560)).

Figure 1 illustrates the company’s CPM costs as a function of the retweets it generates:

  • If nobody retweets, NewBlueFx offers no discount, and therefore carries no advertising cost.
  • For the first 60 retweets, NewBlueFx pays a flat rate of $10.31 CPM, capping its campaign advertising expenditures to $77.94.
  • Then something very interesting happens. Because the discount is capped at 60%, every retweet that exceeds 60 is a bonus, essentially causing the company’s CPM rate to fall-off exponentially the more successful it is.

The more successful the campaign, the lower the CPM

 Figure 1: CPM per Retweet

This example shows the difference between social media and traditional media. In traditional media, your message will only travel as far as you are willing to pay for its distribution. In social media, your message will only travel as far as your audience (asset) is willing to spread it for you.

NewBlueFX recognizes that its audience is an asset that can pay dividends.

Does your company?

For the past two years, this blog has discussed a theory that Audience is an Asset that should be carried on a company’s balance sheet as opposed to the commonly held belief that social media should be tracked as P&L. Over time, the theory has been refined through other posts, such as: Valuating Your Social Media Asset, Social Media is a Mutual Fund and Assets Produce Distributions.

Yet, to be blunt, no matter how much I write, lecture, or consult on this concept, most folks still look at me as if I have two heads. “That’s a nice thought, Ron, but what do I tell my boss when asked about ROI?” Unfortunately, I’ve come to understand that as long as social media budgets are controlled by those afflicted with Communications Myopia, the value of investments in social media activities will remain underestimated–that is, right up until some event forces some of those assumptions to be revisited.

This morning, I read about such an event in the New York Times article: A Dispute Over Who Owns a Twitter Account Goes to Court. The article describes how a company (PhoneDog.com) is suing a former employee (Noah Kravitz) for control over the Twitter audience that he built while working for them.

Originally tweeting under the Twitter handle @Phonedog_Noah, Kravitz had successfully built an audience of over 17,000 followers. Since Twitter allows a user to change their handle without jeopardizing that audience, after leaving Phonedog.com, Kravitz changed his handle to @NoahKravitz. Eight months later, Phonedog.com filed a lawsuit against Kravitz, claiming $340,000 in damages [(17,000 followers) x ($2.50/follower/month) x (8 months)].

Phonedog.com released the following statement to the Times:

“The costs and resources invested by PhoneDog Media into growing its followers, fans and general brand awareness through social media are substantial and are considered property of PhoneDog Media L.L.C. We intend to aggressively protect our customer lists and confidential information, intellectual property, trademark and brands.”

In a nutshell, Phonedog.com isn’t suing him for the handle, which has their brand in it, but instead is seeking to “aggressively protect” its assets (property, fans, followers, lists, trademark). Sound familiar? 🙂

There’s an old saying that says: “You don’t appreciate what you have ’til it’s gone.” Phonedog.com now has a new appreciation for its social media assets. What about your company? Is it still trying to figure out the ROI of a blog post, tweet, or YouTube video? Or has it come to the conclusion that its investments in social media are compounding into long-term marketable assets?

Last Thursday, millions of Southern Californians experienced a major power blackout. The company in the middle of this event, San Diego Gas & Electric (SDGE), had found itself facing the most widespread power outage in its history. Not only had all of its 1.4 million customers lost their power, but they were also demanding to know when it would be returned to them.

In the past, SDGE’s crisis-communications options would have been limited to press releases and press conferences. And although those activities still occurred, SDGE had another option available to it–one that would allow it to speak directly to its customers in real-time. Specifically, the company used its Twitter account to publish 107 messages between 3:52 p.m on Thursday and 9:17 a.m. on Friday.

This mini-case study looks at how SDGE used Twitter to communicate through the crisis, and then it offers some lessons that other companies can learn from the event.

Setting the Foundation

Although San Diego Gas & Electric created its Twitter account (@sdge) on April 24, 2009, it didn’t start posting to it until the following September. During its first twenty-four months of tweeting, the company grew its audience to over 16,000 followers by sharing helpful tips pertaining to energy safety, conservation, and ways for customers to cut their energy bills. Examples of such tips include: changing the filter on your air conditioner, using tankless water heaters, and closing window drapes to keep the sun from heating up your house.

During these first 24 months, the company had established a fairly consistent publishing schedule, averaging 34 tweets per month (median = 31), but that would all change the day the power stopped flowing to all of its 1.4 million customers.

Lights out

SDGE’s first tweet about the event occurred at 3:52 p.m on Thursday:

  • We understand power is out, we are working on the cause and solution. We do not have a restoration time yet.

During the next sixteen hours, the company published 106 more tweets containing information that fell into four different categories: updates, insights, tips, and help.

Fifty percent of the tweets included updates–real-time news such as the number of households affected (1.4 million), neighborhoods affected, and areas which were getting power back.

Insights offered customers a glimpse into the company’s thought process. For example:

    • Think of the system as linked by springs, when one part goes out the rest are affected.
    • SDGE prez said he has been with utility since 1971 and never seen anything like this. There was no warning. Started at 3:30.

31% of the tweets contained tips, which were split into five different sub-categories: safety, help, energy saving, coping, and preparing.

Of these 33 tips SDGE published during the crisis, 36% were devoted to safety. Such tweets included:

    • Safety is key at this time. Prepare to stay home tonight without power.
    • The outage has affected street lights. Please drive safely and treat street signals as four way stops.
    • If you have a personal family emergency plan, please activate it now.
    • If you’re using a portable generator, for safety never plug the generator into any electric outlets. cot.ag/mPEO6f #sdoutage
    • Candles can be fire hazards. Never place them near curtains or other flammable material, or leave them unattended. #sdoutage

 

27% contained pleas for customers to help SDGE bring-up the grid.

    • Remember to turn off air conditioners to prevent them from unexpectedly coming on when the power is restored. #sdoutage
    • During this power outage turn major appliances off and unplug all small appliances to avoid a surge when power is restored. #sdoutage

12% contained coping strategies:

  • Keep your refrigerator and your freezer doors closed to help prevent food spoilage. #sdoutage

and 9% were related to preparation for when the power would be turned on:

    • To prepare for when power is restored unplug sensitive equipment like microwaves, computers and televisions. #sdoutage
    • To prepare for power restoration: Leave one light on so you’ll know when the power is restored. #sdoutage

When the lights came on

During the course of the crisis, the informational needs of SDGE’s customers changed, so the company adjusted its content accordingly. For example, as power was being restored to their customers…

…it began shifting its messages from updates to tips. The following chart illustrates both the volume and type of tweets the company produced during the crisis.

Lessons from SDGE

Companies can learn a few lessons from how SDGE used Twitter:

1) Dig a well before you are thirsty

SDGE had invested twenty-four months and 825 tweets into building its Twitter channel. During that time, not only had it gathered 16,000 followers, but it had simultaneously established the channel as a credible place for corporate information. Had SDGE waited until the event before using its Twitter channel, it’s likely that the company wouldn’t have had the experience to know how to use it effectively.

2) The media follows Twitter
The media is interested in more than just press releases and press conferences. They also monitor Twitter, as evidenced by the Los Angeles Times which lead its first online article of the event with a screenshot of an SDGE tweet.

3) Create a hashtag
Within one hour of its first tweet about the event, SDGE started using the hashtag “#sdoutage.” Hashtags are useful for people to monitor all conversations about the incident, above and beyond what the company is saying about it.

4) Ask for help
Turning on a power grid is much more complicated than turning on a light-switch, and therefore, SDGE needed the cooperation of its customers to help bring the system back online. It did so by asking them for help, such as turning off appliances and spreading the message to other customers.

5) Adjust the message
During the course of the event, the informational needs of the audience changed. At the beginning of the crisis, people needed to know two things: what was happening and what the company was doing to fix the problem. Once those messages were delivered, the company switched to help customers cope until power was restored. As neighborhoods were reconnected to the grid, the company prepared them with steps to take before the lights came on. Finally, after power was fully restored, the company switched to advisories that asked customers to conserve power until network stability was achieved.

Conclusion

In all, SDGE showed how companies can use a channel limited to 140 character messages to communicate in real-time during a crisis.

Is your company prepared to do the same?