Does Social Media Impact Your Company's Bottom-Line?

More and more companies are turning to Web 2.0 strategies such as social media to market and publicize their business. However, does activity on social media sites – such as Facebook, Twitter and YouTube – have a pronounced effect on your company’s bottom-line?

Social media sites give consumers a platform for shaping a company’s message. Used creatively, it can draw positive attention to company or brand. For example, Old Spice’s “Smell Like a Man, Man” social media campaign has been critically lauded as one of the best in 2010.

However, sometimes relinquishing that brand control can have negative effects. For example, when Gap Inc. revealed a new logo on its social media outlets, a large consumer backlash followed, prompting the company to abandon the idea.

Social media also affects more than marketing and advertising. A recent study compared the popularity of three major brands — Nike, Starbucks, and Coca-Cola — on social-media Websites to their stock-price movement. The researcher found an “extremely high correlation” between a company’s fan base and indicators of how their stock will perform by as much as 30 days out. Although the companies received varied returns during the time under review (Starbucks's and Nike's stock both increased, by 29% and 14%, respectively, and Coke's declined by nearly 6%), the theory held true.

Overall, most companies are finding that the positive effects of social media outweigh the negatives, and more and more are focusing on social media. A 2010 Burson-Marsteller study of the largest global companies found that 65% had Twitter accounts, 54% had Facebook fan pages and 50% had YouTube channels. By 2014, social media will have surpassed e-mail as the primary communication vehicle for a fifth of business users, according to a recent Gartner study.