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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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Preface

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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...

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