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The United Breaks Guitars Affect on United Airlines

August 9th, 2009 Posted in Rants

Did you hear about (or more importantly see the YouTube video) of the United Breaks Guitar song and story? Here’s how the Vanno blog sums it up:

Social media marketers (all 100 million of them, if my Twitter count is correct) are bending over backward to congratulate themselves on the effect the 4M YouTube views of a song about a broken guitar had on United Airlines.   Some social media PR types are touting the enormous brand damage done by the incident, and a journalist at the UK Times Online has even connected a 10% drop in United’s stock price with the spread of the YouTube video.

In the last few weeks, this question about the impact of this video on the United stock price has been quite a fun debate. Here’s how Vanno continues on the topic:

So let’s put the United 10% stock price claim to bed first. If you look at other airline stocks on July 10 (the low point immediately after the YouTube guitar video release) you’ll see price drops for Delta, American, Continental and even Southwest. All the drops occurred on small trading volumes, and were followed by a quick recovery. Moreover, United’s stock (UAUA) had fallen by over 100% in the previous month, and day-to-day variations of 25% or more were common. It is, after all, a very low-priced stock in a brutal industry during volatile financial times. In fact, the average day-to-day variance in UAUA price is more than 10% in the period shown in the graph above!

Let me first say that I’m not convinced that “social media” can take credit for anything in particular. But we know for a fact that any number of things can affect stock pricing. We’ve seen it happen numerous times and long before social media is a thing.

Having received phone calls from CEOs who have read a random blog post and been motivated to react or respond, you’d be surprised what makes it to the board room. Which is why I flat out disagree with this point from the Vanno blog:

United may have made a belated attempt to assuage the offended customer/musician, but I seriously doubt very many executive cycles or board moments were dedicated to the incident – despite all the social media navel-gazing.

Sorry, but wrong. When news cycles start picking up stories, execs spend cycles on them. Period. And with 4+ million views of this video, tell me how this issue didn’t come up in the United offices?

That said, I would have to wonder about this same point:

It’s not like the guitar story somehow broke a pattern of behavior on the part of United, or the 4M YouTube views changed the direction of customer perceptions.

Would this cause United to change the way they do business? Probably a yes and a no answer. Yes, everything adds up over time. Even companies like United have to reach the bottom at some point. These types of stories add up, although impact may not be seen or felt instantly.

And when sites like Orbitz and Travelocity make it just as fast to select American or Delta rather than United when booking your trips, 4 million people have another reason to skip United. In a business with tight margins and spiraling revenue, literally everything helps and everything hurts.

It’s not as simple as saying “social media dropped United’s stock price 10%”, but to blow off the impact of 4 million people seeing negative brand impressions is to blow of the overall concept of marketing generally. Any time you discount something as big as the concept of marketing, you’re probably not paying enough attention to the issue at hand.

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This entry was posted on Sunday, August 9th, 2009 at 2:39 pm and is filed under Rants. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
  • http://blog.perfectspace.com nateritter

    Well said! I agree wholeheartedly.

  • http://www.isaidok.com michaelchin

    Nice post, Jake. I think the impact is somewhat difficult to measure on this alone on a single variable.

    If you look at this another way, there's a TREMENDOUS opportunity for a competitor to do better and offer a better alternative. That's where the risk comes into play. You point to Orbitz making it easy to book a trip. Yes, based on price, but mind you, those brands aren't really loved either.

    I think the real message for the other brands is to see the power of this, embrace it fully (i.e. authenticity, transparency, etc.), or as Alan Wolk puts it, just Don't Suck. Couple that together and yeah, United, and every other major airline, would dedicate a lot of time in the board room talking about it.

    Personally, I think that's where it ends for United (and American and Delta). Just talk.

  • stevethomas

    Jake,
    I stumbled onto your site this morning on my Saturday morning ramble and was surprised to find your thoughtful post on the United Airlines Broken Guitar drama. Terrific line of reasoning. My partner just showed me the videos yesterday (clearly I'm the less intouch social media partner) and I had many of the same thoughts you had spinning in my brain. Having spent my formative years in PR for the Electric Utility business and now serving nonprofits I thought I knew exactly what was happening with United.

    Something I haven't seen, again maybe I've missed it, is any sympathy for the United rep who is mentioned so much in the 2nd song. I had to feel sorry for her, holding the corporate line because it is her job and being vilified for it. Ouch.

    Thanks for the multi-layer view. Simple isn't always the best way to look at this stuff.
    I'll be back to your blog on a regular basis. I like the way you think.
    st

  • http://twitter.com/Nudger Nick D.

    Thanks for the thoughtful dissection of my post on the Vanno blog. Your points are well taken. I agree that UAL Corp. marketing – probably at the VP level – was involved in crafting the (weak) public response to the guitar incident and briefing it up the UAL corporate ladder. But at the “C” level – particularly CEO – and certainly board level, a company as complex and damaged as UAL has so many other issues on its plate that another customer complaint – no matter how well publicized – just doesn't get much attention.
    My real broadside was aimed at the myopic and self-congratulatory nature of social media punditry. Most of these people have never been near – let alone worked in – a large, complicated operating company, and don't realize that when it comes to dealing with customers, there is no such thing as an original sin. The idea that somehow social media will change the behavior of corporations forever just because millions of people watch a cute but critical video and then take a few seconds to post a snarky comment somewhere is naive, to say the least.
    And lest you think I'm just a cranky old corporate guy who doesn't get social media, I'm a co-founder of a startup – http://www.vanno.com – that is trying to use social media to measure company reputations. So I'm fully invested in the value proposition. But I've also seen firsthand the enormous range of issues and events that C level execs at big public companies deal with every day, and have to smile when I read the kind of grand pronouncements that are the currency of most social media and “business” blogs today. Most of these writers are looking thru a tiny porthole at companies and assuming that they have the whole view. They don't.

    Cheers,
    Nick DiGiacomo

  • http://www.communityguy.com Jake McKee

    Nick, I think we're basically agreeing here. I'm with you that a CEO might not stop his day over something like this. But my point is that I've been continually surprised at how much CEOs can and do focus on “little issues”.

    And yes, the social media punditry can raise welts from the backpatting, but at the same time, it's pretty impressive to see what can happen. That's my point about the follow-up post showing the luggage tag “I <3 baggage handlers”. It's creating cultural phenomenon… something that simply is NOT good for the industry or United.

    But to say that these things aren't already changing the corporate culture as well as corporations specifically is crazy. It's probably not taking as much effect as some like to proclaim, but it absolutely is taking effect.

    Good conversation!

  • Newyorkjobs

    Thanks I agree that UAL Corp. marketing – probably at the VP level – was involved in crafting the (weak) public response to the guitar incident and briefing it up the UAL corporate ladder. But at the “C” level – particularly CEO – and certainly board level, a company as complex and damaged as UAL has so many other issues on its plate that another customer complaint – no matter how well publicized – just doesn't get much attention

  • Newyorkjobs

    Thanks I agree that UAL Corp. marketing – probably at the VP level – was involved in crafting the (weak) public response to the guitar incident and briefing it up the UAL corporate ladder. But at the “C” level – particularly CEO – and certainly board level, a company as complex and damaged as UAL has so many other issues on its plate that another customer complaint – no matter how well publicized – just doesn't get much attention