Business and the blogosphere

Firms can’t ignore Twitter, Facebook and the rest any longer. There’s a great BBC page all about how firms watch our online moves with ever greater interest. There has been a huge shift taking in place in the balance of stakeholder power. As the article begins, “once upon a time companies could afford to be rude. Unhappy customers would grumble to a few friends, withdraw their custom, but there was little else they could do. Today, they still tell their friends, but they do it online, using social media websites like YouTube, Facebook and Twitter”.

The article starts with a nice example. One person alleges that United Airlines baggage handlers had damaged his $3,500 guitar, but the airline refused to pay compensation and its customer service agents were unhelpful. So he made a music video about the experience and on 6 July 2009 posted it on YouTube. Within three days it had been watched half a million times; by mid-August it had reached five million. United had a massive public relations crisis at its hands, not least as thousands of other unhappy customers now came forward to vent their frustration.

This puts consumers in a new, powerful position that firms are anxious to manage. More and more ‘news’ is generated online, with journalists keenly watching trends and comments. Computer software is being developed that trawls through hundreds of millions of postings looking for patterns and breaking news. Researchers at Hewlett Packard showed that they can “accurately predict” a Hollywood movie’s box office takings by counting how often it is mentioned on Twitter before it opens. This type of quantitative market research is easier to do than qualitative measures of “sentiment”, whether the deluge of social media comment is positive or negative.

I’m not convinced that firms have got it right yet, nor that internet babble is a good guide to consumer behaviour. Then there are language problems. “This board is really bad” would almost certainly be interpreted as a negative comment, although it might be the ultimate praise among skateboarders. One European clothing company, popular with inner city youth in the United States has admitted that its social media team is baffled by its customers’ ever changing slang, and even the online Urban Dictionary provides little help.

But it is still groundbreaking stuff. Companies have “for the first time access to people’s minds in real-time,” says one analyst. The tools on offer provide companies with the ability to show trends, hot topics, the reach of brands, customer mood and how competitors are doing. Very few firms have any idea what do with all this, yet. The article gives a few examples of innovations.

Probably the best current use for the technology is as an early warning system when something goes wrong. But there are dangers. Financial Times columnist Lucy Kellaway warns that the obsession with social networking can make management lose focus. If a company needed a random tweet to alert them to a problem, surely something was wrong in the first place.