If the SEC and many companies took marketing more seriously, I wouldn’t have these questions. Those key promises would be made to the public, not just to the insider’s circle. And think how things would be different if companies were not just held to investors’ and analysts’ expectations, but to the public’s and customer’s expectations as well. Apple Inc. (NASDAQ:AAPL) is one of the very few companies that manages to successfully and repeatedly keep investors and customers happy. Apple Inc. (NASDAQ:AAPL) does not rely on news media to cover landmark events, and instead invites the world to personally watch and participate in conferences online. (Which is also why Steve Jobs’ face was so recognizable as compared to other well-known, but less visible, CEOs.) And feeds and enables the “fanboys,” often with the use of social media.
But all of this makes me wonder about “material” information versus interesting marketing metrics. I come from a marketing background. That is the language I speak and the world I best understand. Are public companies held back from increasing sales and spreading awareness (both results of good marketing) because of SEC limitations on what information can be shared and how it must be shared?
From a marketing point of view, the information Hastings shared was a great bullet point- exactly the kind of thing a marketer would want to share, particularly through the convenience of free social media. To publish a full press release on it would be a bit over the top or self-serving, unless it was common practice to issue subscriber or viewing numbers. A quick review of the Netflix, Inc. (NASDAQ:NFLX) press releases shows that it is not a common practice for them to do so, but they did issue a similar one in October when it reached a benchmark of thirty million subscribers.
From the press release:
Netflix hit the 10 million member milestone in 2009, a decade after it launched its DVD-by-mail service in the U.S. That number jumped to 20 million members by the end of 2010 with the widespread adoption of the Netflix streaming video service in the U.S. and Canada.
The expansion over the last 22 months comes both from the continued growth of U.S. and Canadian streaming subscribers as well as the introduction of the Netflix “watch instantly” service to new markets in Latin America and Europe. Netflix is currently available in 51 countries, with Sweden, Norway, Denmark and Finland the most recent additions.
In a Facebook post today, Netflix Co-founder and CEO, Reed Hastings, thanked subscribers, adding “your choice to be a Netflix member helps us to get more content every year and helps us further improve the Netflix, Inc. (NASDAQ:NFLX) experience. You make it possible for us to create the most amazing Internet television experience ever.”
(Interesting to see that Hastings posted to Facebook before the press release went out.)
There is an argument that the 200,000 followers could have seen the post, got excited about the benchmark, quickly bought the stock, waited for the stock to inevitably bump up on the good news, and sold their shares quickly, making a quick and tidy sum. It is a possibility, yes. But it is an incredibly unlikely possibility. First, all 200,000 followers would have seen it before anyone else, including the financial media. Second, it assumes the unlikelihood that of the 200,000 followers there were no media representatives, or more responsible investors. (Which we know was not the case- we know reporters and bloggers, including this writer, are included in the 200,000.) Third, it makes the assumption that 200,000 people can keep a secret that was posted on one of the most public websites in the world. Ergo, argument invalid.
On a note about the importance of social media marketing to companies- Facebook Inc (NASDAQ:FB) continues to prove itself invaluable to other companies. It is not merely a social photo album, game center, or way to talk to high school classmates. The site has proven itself over and over again to be a key way to find information from important brands, communicate with “thought leaders,” and for companies big and small to identify the needs and opinions of customers- and all without cost to the company or individual. Returning briefly to Hastings and Netflix, Inc. (NASDAQ:NFLX). Hastings was able to reach 200,000 interested, key customers for free, and within minutes, with his Facebook post. Prior to Facebook Inc (NASDAQ:FB) (or Twitter) companies would have had to pay thousands of dollars to reach fewer people, in a longer period of time. As long as Facebook can continue to keep itself relevant to other businesses and individuals, it will remain a good investment.
I think Netflix, Inc. (NASDAQ:NFLX) and Reed Hastings just became a great marketing and public relations case study for the use of social media versus press releases in the future. Not to mention a case study on how to succeed within the SEC limitations.
Companies need to be allowed to communicate openly with investors as well as customers. The SEC needs to allow companies to share interesting information when they want to and how they want to. “Allowing” social media is a great first step. But let’s see more!
Erin McBride has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Netflix. The Motley Fool owns shares of Apple, Facebook, and Netflix.
