Measuring the Impact of Social Media on Business Profit & Success
A Fortune 500 Perspective
Table Of Contents
- About the author(s)/editor(s)
- About the book
- This eBook can be cited
- Chapter 1. Introduction
- Chapter 2. Research Background
- Chapter 3. Research Methodology
- Chapter 4. Twitter
- Chapter 5. Facebook
- Chapter 6. YouTube
- Chapter 7. Google+
- Chapter 8. The Big Four
- Chapter 9. Research Implications
- Chapter 10. Conclusions
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The idea of writing this book originated from a casual chat one afternoon about how social media are affecting everybody’s life, both college professors and students alike. As an advertising professor and a public relations professor respectively, we have noticed something in common in our teaching: Students are showing a growing interest in knowing how to use social media for different purposes, such as a public relations campaign. Numerous industrial cases suggest that social media are becoming important for organizational communication, especially nowadays. However, people in different disciplines seem to disagree on how to measure the outcome of using social media. For example, advertising professionals may be more interested in the change of brand awareness whereas public relations practitioners may attach more importance to brand reputation. On the other hand, people in a management position tend to think financial outcomes such as sales and net incomes matter the most. Such a discrepancy poses a significant challenge to our teaching and students’ learning.
What is the “right” way to teach students how to measure the outcome of an organization’s activities on social media? Or, should we ← VII | VIII → say, is there a “right” way to teach students how to measure the outcome of an organization’s activities on social media? For example, an organization may have an impressive number of “likes” on its Facebook page and numerous “followers” on its Twitter account, but does that mean anything from a business performance perspective? In other words, is it worth an organization’s effort to maintain an active presence on social media? The key question is: Is it reasonable to use social media metrics such as the number of Facebook “likes” and the number of Twitter “followers” to predict an organization’s business “success” even though those metrics are nonfinancial indicators?
We consulted the literature for the answers to these questions. Many prior research studies discussed how an organization should utilize social media for various purposes. However, few studies provided strong empirical evidence to support how the outcome of using social media should be measured and why. In general, there is no conclusion or consensus on whether a “success” on social media such as generating Facebook “likes” can translate into a “success” in the real business world in the form of revenues and net incomes.
We then decided to conduct a pilot test to see whether we could dig further in this research direction and fill the theoretical gap in the literature. We chose to examine how the Fortune 500 companies use social media because they are the leaders in various industries. We searched for each Fortune 500 company’s social media account on five different platforms including Facebook, Twitter, YouTube, Google+, and Pinterest. These social media platforms were selected because of their popularity. For those companies that had an account on a certain platform, we recorded several key product indicators (KPIs) from their account such as the number of Facebook “likes,” Twitter “followers,” and YouTube video “views.” All these data were collected in March 2013. In addition, we recorded each public company’s stock price and earnings per share on the second day after all the KPIs were collected. We also recorded each public company’s net income in 2012. Based on these data, we conducted a series of correlation analysis. The results showed that a company’s nonfinancial activities on Facebook, Twitter, YouTube, and Google+ were significantly associated with its Fortune 500 ranking, net income, and stock price. For example, when a company ← VIII | IX → had more tweets on its Twitter account, it tends to have a higher net income and also ranks higher in the Fortune 500 list. A company’s total number of subscribers on its YouTube channel is significantly and positively associated with its stock price. We did not find any significant relationship between a company’s nonfinancial activities on Pinterest and its Fortune 500 ranking and other business performance indicators, possibly because the history of Pinterest is much shorter than the other four social media platforms.
The results of the pilot test gave us confidence in going further and conducting a more comprehensive study of how a “success” on social media might be associated with a “success” in the real business world. We decided to keep Facebook, Twitter, YouTube, and Google+ in this examination but dropped Pinterest due to the pilot test findings. To gain an in-depth understanding of how organizations use social media over the years, we decided to explore the Fortune 500 companies’ social media activities (communication messages to the public) in a five-year time span from January 2009 to December 2013. Meanwhile, the business performance data of each public company during the same five-year period such as stock return, total revenue, net income, and earnings per share were also collected. These two types of data, both financial and nonfinancial, were then matched and statistically analyzed to see whether a company’s social media activities were significantly associated with its business performance.
After we finalized this research design, we developed a book proposal and presented it to Peter Lang Publishing. We were awarded a contract after the proposal had been favorably reviewed by external reviewers. Since this research project aimed to cover 500 companies’ nonfinancial activities on four social media platforms in five years, we anticipated to set up at least four databases, one social media platform each. Each database would have thousands of cases because we intended to randomly sample one communication message from each company in each month during the five-year time span (for example, if every company had an account on Facebook and posted at least one message each month from January 2009 to December 2013, we would have 500 × 60 = 30,000 cases in our Facebook database). We realized that this study was too ambitious to complete by just two researchers, ← IX | X → and we needed help. Luckily enough, we had several talented doctoral students in our school, and we turned to them for assistance in the data collection. These students were amazingly kind and hard-working. They helped us tremendously in the raw data collection. The truth is we would never be able to finish writing this book on time if we did not have their help. We want to express our most sincere gratitude to them, including Jiangmeng Helen Liu, Michael North, Yi Grace Ji, Fan Yang, Zifei Fay Chen, Cheng Hong, Chun Zhou, and Qinghua Candy Yang for their incredibly warm-hearted and generous support.
Moreover, we would like to thank Dr. Tie Su in the Department of Finance of the School of Business Administration at the University of Miami for his valuable suggestions on how a public company’s business performance should be measured, from both a finance and an accounting perspective. Many of our research questions were constructed based on his advice. We also want to thank the two anonymous reviewers of this book for their constructive feedback. Finally, we want to extend our thanks and appreciation to Mary Savigar, a senior acquisition editor at Peter Lang Publishing. Mary was very friendly and professional in communicating with us about how to prepare the book proposal and the final manuscript. This book would not come out so quickly without her efficient work.
Don W. Stacks
May 25, 2015
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- X, 170
- ISBN (PDF)
- ISBN (ePUB)
- ISBN (MOBI)
- ISBN (Hardcover)
- ISBN (Softcover)
- Publication date
- 2016 (February)
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- New York, Bern, Berlin, Bruxelles, Frankfurt am Main, Oxford, Wien, 2015. X, 170 pp.