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Measuring the Impact of Social Media on Business Profit & Success

A Fortune 500 Perspective

Cong Li and Don Stacks

An organization can have a high number of «likes» on its Facebook page and lots of «followers» on its Twitter account, but does that mean anything from a financial perspective? Is it worth the organization’s effort to maintain an active presence on social media in order to generate more revenue? Is it possible to use social media metrics such as the number of «likes» and the number of «followers» to predict an organization’s «success» even though those metrics are nonfinancial indicators? Prior research studies have looked at how organizations should utilize social media, but few studies have provided strong empirical evidence to support how the outcome of using social media should be measured and why. Focusing on Facebook, Twitter, Google+, and YouTube, this book examines how Fortune 500 companies use social media. Collected over a five-year period, the authors assess the companies’ social media activities and their business performance data, such as stock return, total revenue, net income, and earnings per share. These data, both financial and nonfinancial, are matched and statistically analyzed to see whether a company’s social media activities are significantly associated with its business performance.
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Chapter 8. The Big Four


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Chapter Eight

The Big Four

Chapter Overview

In the previous chapters we have presented our research findings on each of the four social media platforms. In this chapter, we will combine all the data that we collected and analyze them at a more aggregate and more theoretical level. Since the data cover a 5-year span from January 2009 to December 2013, we will also test the social media usage trends across different years. In conducting such data analyses, we hope to answer the following research questions:

• What is the best way to measure a company’s outcomes on social media, including reputation, relationship, trust, credibility, and confidence?

• Do a company’s social media outcomes affect its business performance from a finance perspective, measured in its monthly stock return?

• Do a company’s social media outcomes affect its business performance from an accounting perspective, measured in its quarterly ← 103 | 104 → total revenue, net income (or loss), earnings per share, profit margin, return on assets, and return on equity?

• Do a company’s social media outcomes differ across various business sectors?

• Does a company’s social media activeness differ across the four platforms Twitter, Facebook, YouTube, and Google+?

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