Tesla’s media strategy: build a brand without spending on advertising

Elon Musk uses Social Media to take on Detroit at the Marketing Game - and He's Winning

April 9, 2013

It has been quite a week for Tesla Motors (TSLA). The Palo Alto-​​based elec­tric car com­pany reported that it reached prof­itabil­ity for the first time, saw its stock close at an all-​​time high, unveiled a new financ­ing pro­gram and cel­e­brated the open­ing of its expanded show­room at San Jose’s San­tana Row.  See the full Mer​curyNews​.com story here.

And much of the action was dri­ven by CEO Elon Musk’s bold, brash and uncon­ven­tional use of social media. The man who helped change the Inter­net by cofound­ing Pay­Pal is prov­ing just as deter­mined to change the rules for how pub­lic com­pa­nies com­mu­ni­cate — even as the Secu­ri­ties and Exchange Com­mis­sion wres­tles with how to bring those rules into the 21st century.

Elon Musk is a mar­ket­ing genius, in our view,” said Adam Jonas, an ana­lyst who cov­ers Tesla for Mor­gan Stan­ley. “A tact­ful use of social media means a tiny car com­pany has the best-​​known financ­ing pro­gram on the planet. … Main­stream OEMs (orig­i­nal equip­ment man­u­fac­tur­ers) are being taken to school here.”

Toyota Says It's Not Considering Additional Tesla InvestmentGreg Sieck, a San Francisco-​​based brand strate­gist, likened Musk’s image as the Sil­i­con Val­ley pio­neer tak­ing on Detroit and Big Oil to the way Lee Iacocca revi­tal­ized Chrysler three decades ago. “Peo­ple want to be engaged with Tesla, and they want to read Elon’s tweets,” Sieck said. “He’s the voice of the company.”

Ana­lysts say Tesla’s media approach — strate­gic tweets from Musk that build inter­est in upcom­ing cor­po­rate announce­ments, cre­at­ing a steady drip of infor­ma­tion — is uncon­ven­tional, but largely working.

Fan updates

When Musk pub­licly took on The New York Times over an unfa­vor­able review, for exam­ple, he kept the feud in the news for days while man­ag­ing to gal­va­nize the Tesla faith­ful on his behalf. And he keeps cus­tomers and fans updated on Tesla’s progress with an infec­tious enthu­si­asm. “Am happy to report that Tesla was nar­rowly cash flow pos­i­tive last week,” he tweeted on Dec. 3. “Con­tin­ued improve­ment expected through year end.”

While tra­di­tional automak­ers spend heav­ily on print and tele­vi­sion adver­tis­ing, Tesla is build­ing its brand in a way that doesn’t cost anything.

For the past week, a lot of atten­tion has been focused on the com­pany — prob­a­bly more than their fair share,” said Ben Kallo, an ana­lyst with Robert W. Baird. “When Elon Musk tweets, peo­ple write arti­cles spec­u­lat­ing about what it is.”

The company’s stock rose more than 2 per­cent after Musk tweeted March 25 about a “major” announce­ment that ended up being the financ­ing pro­gram. Wall Street was actu­ally more excited about the tweet than about the news itself, which was fol­lowed by a drop in Tesla’s stock, but Musk nonethe­less suc­ceeded in bring­ing a spot­light to an unsexy sales technique.

Musk has more than 176,000 fol­low­ers on Twit­ter, and he deftly uses the social media plat­form to dish out tid­bits about the three com­pa­nies he’s cur­rently involved in: SpaceX, Tesla and SolarCity. It helps that Musk is an eso­teric bil­lion­aire who dreams of send­ing humans to Mars.

In a way, Musk’s Sil­i­con Val­ley celebrity is akin to that of Net­flix (NFLX) CEO Reed Hast­ings, who has sim­i­larly built a com­pany with a fiercely loyal cus­tomer base and plenty of media buzz. Hast­ings, too, has pushed the bound­aries when it comes to social media; last sum­mer, he posted a Face­book mes­sage when his movie-​​rental jug­ger­naut hit a cus­tomer milestone.

Net­flix stock surged, and the SEC in Decem­ber threat­ened to fine Hast­ings for not dis­clos­ing the news through a news release or a reg­u­la­tory fil­ing. Last week, though, the SEC issued a report say­ing it was accept­able for com­pa­nies and CEOs to dis­sem­i­nate news via social media, so long as investors are given a heads-​​up first via the more tra­di­tional channels.

While many pun­dits viewed that as a green light for Hast­ings and oth­ers, Patrick Quick, a secu­ri­ties attor­ney in Foley & Lardner’s Mil­wau­kee office, said social media use by CEOs is still fraught with poten­tial land mines.

Do we really want to tell investors that at any given moment, we could dis­close mate­r­ial infor­ma­tion in any of these four or five ways, so you’d bet­ter watch all five?” he asked.

Quick also sug­gested that Musk’s cryp­tic March tweet about a big announce­ment could be deemed even more egre­gious in the SEC’s eyes than Hast­ings’ Face­book post­ing about the spe­cific milestone.

SEC rules say, in effect, if you’re going to dis­close news about a sub­ject, you have to dis­close fully about it,” he said. The fact that the stock mar­ket reacted to the tweet only makes it more likely reg­u­la­tors may crack down on Musk’s vague mis­sive, he said.

Mark Wax­man, a mar­ket­ing expert at con­sult­ing firm CBIZ in San Jose, also cau­tioned that Musk’s strat­egy risks investor fatigue. “Promis­ing a news release a week breaks a car­di­nal rule of media rela­tions: To only pro­mote when you have some­thing worth­while to say,” he said.

Pop­u­lar stock

Indeed, Tesla’s stock, which closed Fri­day at $41.37, has doubters who are “short­ing” the stock, or bet­ting against its rise. But the stock is also pop­u­lar with retail investors who fol­low news head­lines but may not have dug into the company’s SEC filings.

Theo O’Neill, man­ag­ing direc­tor of Litch­field Hills Research, is among those who argue Tesla’s social media strat­egy is pay­ing off. O’Neil said that while other elec­tric vehi­cle com­pa­nies have fal­tered, Tesla is actu­ally pro­duc­ing cars in increas­ingly higher vol­umes — some­thing that many doubted Musk could pull off.

He com­pared the cov­er­age of Tesla to the cov­er­age of Fisker Auto­mo­tive, a venture-​​backed com­pany that has strug­gled to pro­duce its lux­ury Karma and appears to be spi­ral­ing toward bankruptcy.

If Fisker Auto­mo­tive had fig­ured it out,” said O’Neil, “we’d all be pay­ing atten­tion to Hen­rik Fisker.”