Reddit's Short Squeeze Saga Holds Lessons for All Brands

As share prices have returned to earth for GameStop, AMC, Blackberry and other struggling brands caught up in January’s Reddit-fueled short squeeze stock frenzy, a clearer picture of their actual marketing strengths and weakness is emerging. The actions of individual investors, spurred by a populist revolt against hedge funds shorting stocks on a message board through app-based financial platforms, also contains crucial takeaway for brands. That lesson: How soundly you structure your brand identity determines how successfully you can withstand the sudden and volatile strikes that can come from financial markets and social media. In conversations with marketing and media industry leaders, the consensus is that GameStop has an opportunity to revive its flagging brand—to a degree. Meanwhile, Blackberry has been too battered for too long by rival smartphone makers to inspire much beyond halfhearted nostalgia among former owners. Lastly, AMC has the opportunity to change the conversation about its brand as it continues to be buffeted the pandemic’s social distancing measures and the rise of streaming. Building a better brand antenna Most major brands have improved their rapid-response communications after a decade of social media surprises. But online masses’ ability to gather virtually with greater cohesion and urgency is forcing marketing executives to redevelop and retune their strategies in the aftermath of the short squeeze. "'We didn’t see it coming' will fast become a tough answer to deliver to the boss or board,” said Chris Perry, chief innovation officer at Weber Shandwick. “Companies must build a better antenna to cover social blind spots. That includes cultural intelligence—the ability to understand the cultural evolutions that drive new behaviors—and listening intelligence that goes deeper than awareness of a problem. Insights need to help drive the right actions.” A brand’s ability to build a better antenna requires investment in the capabilities to listen and decode cultural conversations on a much wider and deeper scale, Perry said. Developing “platform fluency” must go beyond mastering social media ad products. The Weber Shandwick leader advises extra education into how users are engaging with new platforms, like text/voice social platform Discord or the audio-based presentation app Clubhouse. The most relevant thing brands can do right now to head off any bombshells, according to Perry, is to “respect the depth of subculture energy in forums like Reddit, which can have outside impact on reputation and risk.” Up, down and neutral Outside of traditional brands, Reddit has proven it can directly move markets to perform wildly, noted Peter Horan, founder of the advisory firm Horan MediaTech. Reddit ably demonstrated its marketing acumen by meeting the controversy head on by swiftly producing a stark, five-second Super Bowl spot. Conversely, Robinhood experienced significant backlash from viewers of its Super Bowl ad who were still angry about the investment app’s decision to briefly halt trading of GameStop and other affected stocks during the height of the short squeeze. “Oddly, I expect this mess to register as neutral to positive for the targeted companies,” Horan said. “GameStop and Blackberry were far from the front of anyone's consciousness. This short squeeze fiesta makes it appear that they have consumers who care about them. That’s always a plus. AMC is on the verge of being as dead as the eponymous car company that gave the world the Gremlin.” Reddit and Robinhood are studies in contrast, Horan explained. “The notion that Reddit could move stock markets and terrify Wall Street was inconceivable a month ago. It's messy and chaotic, but it's more of a force to be reckoned with than anyone knew." Robinhood is the entity that will suffer the greatest damage to its brand, Horan concluded, due to the disconnect of its temporary trading freeze and the brand’s own name. If your name reflects a heroic character famous for robbing from the rich and giving to the poor, you’d better not be perceived as being on the side of powerful interests. “[Robinhood] set themselves up as the future of investing and the friend of the little guy,” Horan said. “As this fiasco spun out of control, it became clear that they were way over their heads. The Super Bowl ad sounded like whistling past the graveyard.” From screaming headline to forgotten footnote Perry expects this kind of “social turbulence” to continue to ripple through the culture this year. With this in mind, business leaders should anticipate that reputation firestorms like this will happen more frequently. “What’s built into the DNA of many leading companies, and notably digital-first companies like Robinhood, is an ingrained agility to pivot based on market forces,” Perry said. “If you look at the history of dominant social media as an example, the story shows product misses, user revolts, employee conflict and more. It’s the underbelly of high growth stories that new platforms like Robinhood now face.” Marketing leaders should be instructing agency partners and brands to develop clearer strategies for reacting to macro events, said Ross Shelleman, CEO of Chicago-based full service agency Aisle Rocket. The question for Shelleman is: how can brands be put in a stronger position to be nimble enough to capitalize on exigencies? "Speed is so important," Shelleman said. "This is an example where, if GameStop doesn't capitalize on [the attention from the short squeeze incident], it's a huge loss." The upside of increasingly volatile social turbulence is that today’s headline becomes a minor footnote—or altogether irrelevant—for a company in the long term, Perry surmised. Of course, this kind of brand recovery is dependent on how marketing leaders make things right and stay close to their customers. “Today, more than ever, there is an opportunity for a brand to seize the moment to articulate their brand values in light of the current events,” said Bryan Gernert, CEO, Resonate. According to Resonate Elements data, 55% of GameStop shoppers strongly value brands that are considered honest and trustworthy. “GameStop has the opportunity to address what happened directly and boost the loyalty of their core audience,” Gernert said. “If they want to boost their profile even further, they could make a donation to a relevant charity as a show of goodwill. Highly engaged audiences will take to social media to endorse or cancel a brand without pause. They are two times more likely to shop their values by spending with—or pivoting away from—brands whose values don’t align to theirs.”

Digital Transformation

Reddit's Short Squeeze Saga Exposes Challenges and Opportunities for All Brands

The marketing winners and losers when the internet comes knocking at your company's front door

David Kaplan

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David Kaplan