By Ryck Lent

“It’s the antenna, stupid!”

Well, sure it is. But Apple’s (AAPL) handling of this product problem in the new world of social media and social commerce is worth considering in detail. Here’s the key statistic:

During seven trading days, from the Friday (July 9th) prior to Consumer Reports’ confirmation of the antenna problem and the “Not Recommended” review (Monday July 12) through Monday, July 19th, AAPL stock dropped around $15 per share. With a little over 900M shares outstanding, this means AAPL lost $12 BILLION in market capitalization — a 5% decline. For comparison, the DJII and NASDAQ indexes for same period were essentially flat.


Some highlights from the timeline:

Consumer Reports (CR) posted its “Not Recommended” blog post Monday July 12. First comments on that blog are timestamped around 11:30am.

Reports surfaced on Twitter Monday afternoon that Apple tech support moderators were deleting threads linking to the review. NPR’s Marketplace radio broadcast Monday evening included this news along with a mention of the Twitter traffic on the issue. On Monday, AAPL closed at 258, $3 below Friday’s close.

On Tuesday July 13, as word of CR’s bad review spread — a blog post only available online — the stock dropped sharply to around 248, then recovered to 251 at the end of the day.

The combination of the CR online review and the accompanying social media distribution of that news moved the stock price down $10 over two trading days.

Later in the week, as the groundswell of concern continued to grow, AAPL tersely announced a news conference for Friday, July 18. On Friday, Steve Jobs explained that, although there was nothing wrong with the iPhone 4, Apple would be offering protective rubber bumpers free to iPhone 4 purchasers.

Keep in mind that news of the antenna problem with the iPhone 4 had been in the market since the first day of availability (June 21), when the stock hit a high of 270. The stock had been moving down since then, more or less in step with the overall market. Check the one-month chart below:


But the last 7 days have been very expensive for AAPL — and Apple’s stockholders — in no small part due to the impact of social media. Consider:

The CR blog post offered independent confirmation of the problem — picked up immediately and redistributed by 1,000s of Twitter and blog followers.

  • Point to ponder: Once in the social media stream, a news item takes on a life of its own, spreading ever more widely.

The whisper of censorship on Apple tech support forums boosted the visibility of the story many-fold, and encompassed trusted mainstream media such as NPR’s Marketplace.

  • Point to ponder: Once in the social stream, trying to limit distribution only spreads the item further, and trying to correct an error is an uphill struggle. Does Apple — or your organization — have a realistic policy on managing social media during a business crisis or other event?

Ignoring the social channel is no cure for a missed opportunity. The social media sphere had already determined that Steve Jobs would offer free bumpers for the iPhone 4 at the news conference on Friday July 16. Had Apple not done so, the fallout (on both a PR and financial front) would have been even worse on Monday July 19th. With gag fixes like an “Antenna-Aid” and other items, the damage has been limited, but not undone.

  • Point to ponder: In this great blog post — “Antennagate” — former Apple exec Jean-Louis Gassée imagines a (sci-fi) alternate past with Steve Jobs offering social transparency about the antenna issue at the product launch. If only it were so. But in a socially-connected news and commerce world, a company’s leaders can no longer stay inside the walls of a PR and legal fortress. The social forces are too plentiful, and too powerful, for a firm to withstand a such a siege. Better to step out through the gates and begin talking to those social forces directly.

To be sure, the strong earnings news released Tuesday, July 20, has driven AAPL’s stock price up near pre-CR review levels today. Maybe Steve Jobs was counting on that in his less-than-fulsome acknowledgment of the antenna problem last Friday. The point is not the stock price moves alone, but the speed and power of socially-driven digital distribution of information — good, bad or simply engaging — to capture attention, influence perceptions and trigger decisions. Business leaders of all stripes ignore this new dynamic at their — and their organizations’ — peril.

Here are just a few of the posts that help create the social tsunami around the iPhone 4:

 

Ryck Lent

social media marketing social tools