A reader writes to me:

“As an empirically-based economist, I would like to know whether there are studies that show the impact of twitter, Facebook and other social networking sites on business growth. I have a client (I do a small bit of consulting) that is pushing hard to get “into” social networking to grow the business. I am a bit reluctant, because there is no way to “control” the message. If there’s even one former customer that is unhappy with my client, the negative effects can be explosive. I also wonderwhether paying Google for per-click exclusive use of specific words can really grow a business. Your thoughts would be most welcome!”

I’m so intrigued by this question and its implications that I thought I’d offer up my answer here and also ask you, dear readers, for your two cents too.
First though, are there non-empirical economists? What would that mean? That they follow economic theories even when actual real-life data proves them wrong? Hmmm…
More seriously, the first comment I have about this question is that the writer is already out of step with modern reality. As merchant after merchant has demonstrated, there is no controlling “the message” any more and the sooner marketing and PR people accept that, the sooner they can start helping their clients in this brave new world. Control always was an illusion anyway.
Given that fact, it also means that your customers, your competitors and your marketplace are already having discussions about your products, services and employees, and they’re having it in online forums, whether it’s a protest group on Facebook (“United Airlines Sucks!”), a persistent hashtag on Twitter (#attfail) or just a meme that travels from blogger to blogger.
The question then isn’t whether it makes sense to delve into social networks even though you can’t control the message, the question is whether you’re paying attention to a medium where the message has long since escaped and has a life of its own. This means that your customer defines your brand. It’s not about expensive TV spots, it’s not about the right Pantone color in the logo when printed, it’s not about the company at all.
This is both terrifying and exhilarating because it means that good companies with good products — like Apple with its insanely popular iPod line — can benefit even without any branding or marketing efforts, and bad companies — like United Airlines — are going to suffer from a bad reputation even as they spend money advertising and trying to position themselves as a market leader.
My take is that it’s “step zero” to monitor what’s going on in the social media space. Even if you don’t want to participate, which is a mistake, you should at the very minimum be paying attention to what people are talking about. You can use individual services like search.twitter.com, but far smarter is to use a more sophisticated monitoring tool like Filtrbox or Radian 6.
There are many studies, some apocryphal, others actual more rigorous scientific research, on the topic of social media on business growth, and a quick search of Google will reveal quite a collection of data on the topic. Intuitively, though, if your customers are already talking about your product, service or competitor, how can that discussion not have an impact on your business, for better or worse?
My take away is this: if you are truly going to help your clients succeed in the brave new world of 21st Century business, you need to enthusiastically embrace social media, jumping in and learning best practices from such books as Trust Agents, The New Community Rules, The Tipping Point and Groundswell, along with by participating in the communities. The key is to remember to engage with your customer base, not just join these social media sites to create new bully pulpits for your marketing and sales messages.