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.”