Warning: Social media at Estee Lauder…

August 23, 2010

Social Media Process v. 1.0

Corporate lawyers aren’t known for being early adopters, whether of cutting-edge technology or zippy new buzzwords. As a result, company filings may be one of the last places to spot new trends.

So we’re assuming that a recent sighting means social networking, that many-splendored creature, is here to stay: It’s now scary enough for the legal eagles to include in the stodgy Risk Factors section of the annual report EstâŸe Lauder (EL) filed on Friday. (It could also mean the fad is fading, but we’re willing to reject that one out of hand.)

Here’s the relevant part of EstâŸe Lauder’s warning:

“While we devote considerable effort and resources to shape, analyze and respond to consumer preferences, we recognize that consumer tastes cannot be predicted with certainty and can change rapidly. The issue is compounded by the increasing use of social and digital media by consumers and the speed by which information and opinions are shared.”

The makeup-maker goes on to warn that failure to respond quickly could mean “our financial results will suffer.” No doubt. And this just a month after Facebook announced 500 million active Facebook users, and just shy of two years since it boasted of its first 100 million.

The term “social media” (along with variations on it, and on “social networking’) has shown up in the filings before, of course, but primarily in those of tech and media companies — Google, Yahoo, Microsoft, News Corp and Walt Disney Co., to name a few. Other companies have mentioned the concept in discussing their marketing strategies.

The only other consumer-product company we’ve found that lists one of these terms as a risk factor in its 10-K has been lululemon athletica (LULU), the Vancouver-based maker of “yoga-inspired apparel.” For what it’s worth, we’re using a fairly broad definition of consumer products, including appliance, clothing, auto and alcohol producers, among others. lululemon’s risk-factor phrasing is similar to EstâŸe Lauder’s:

“We rely on social media, as one of our marketing strategies, to have a positive impact on both our brand value and reputation. Our brand could be adversely affected if we fail to achieve these objectives or if our public image or reputation were to be tarnished by negative publicity. Any of these events could result in decreases in sales.”

Watch for the term to crop up in other risk factors near you in the near future. Meantime, if you’re looking for hot new trends, don’t bother with Securities and Exchange Commission filings.

Image source: Damien Basile via Flickr

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