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Chapter 1: Introduction
1.1 Compendium of social networks
The number of users of social networks is growing exponentially. The population of the social network grew from 100 million in August 2008 (Zuckerberg 2008) to more than 800 million at the end of 2011 (Ostrow 2011). Worldwide social media revenue is gradually reaching a total $10.3 billion in 2011 and expected grow to $14.9 billion in 2012 (Gartner 2011). Facebook, the most popular social network, has an estimated 770 billion page views each month (pingdom.com 2011). This powerful social networking medium appears to be a great opportunity for enterprises to extend their reach to customers. Social networks provide web-based services (Betonio 2010) that allows users to construct public or semi-public profiles, communicate lists of users with whom they share a connection, and view and traverse both their and others’
lists of connections (Danah and Nicole 2007). People use social networks like Facebook, twitter, Plurk, and Linkedin to make friends, share photos, express opinions, play games, and exchange a network of information in real time. Meanwhile, enterprises use these social platforms to spread information, promote new products, and interact with customers. For example, T-Mobile's (unrulymedia.com, 2009) shared with customers on YouTube and Facebook a video of commuters dancing at Liverpool Street Station in London: The video spread through social networks and generated over 21 million views on YouTube in three days (viralblog 2009). They then held dancing activities in Trafalgar Square to involve everyone in the square.
This activity attracted more than 18 million video plays, 20,649 comments, and an increase in sales by 22%.
With the maturing of cloud computing, networking, and communication, users have developed different behaviors and are now spending substantially more time on online networking (InsightXplorer 2011). According to a Nielsen report (Nielsen 2011), Americans spent 53.5 billion minutes a year on Facebook. In Taiwan, a high-internet-usage country, the reach rate of social networks is over 94% (12.3 million). In other words, people in Taiwan spend 508 minutes (31.5% of Internet usage) using social networks (InsightXplorer 2011). The social networks have a strong influence on consumers (Los Angeles Times 2011) and play such an important role in people’s lives that it can reach more people than any other channel. More enterprises have invested resources in social networking operations (inside.com 2010);
the operating methods include operating a fan page, building photo or flash plug-in fan pages, developing applications, and placing attractive advertisements on Facebook. For this reason, many companies own a professional group in charge of
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managing their social network. The budget for social network advertising accounted for a higher percentage than in the previous year (Business Next 2011). In the United States, the U.K., France, and Germany, the price per click of a Facebook advertisement increased by 74% in 2011 (TBG Digital 2011). Regardless of the positive or negative effects, user experiences circulate quickly, and brand value could change in only a few minutes. For example, users posted, “Dell posts wrong price, and they don’t perform it!” on a personal blog or social network, and the information caused a negative brand word-of-mouth (WOM) rise from 100 to more than 1,000 records (iBuzz 2009). Because of the fast and immense network effect, the “Brand Community” on social networks is one of the more influential groups that could have an impact on the minds of users (Huang & Chang 2007).
Major enterprises on Facebook use the platform as part of a joint marketing strategy (WaveMetrix 2010). Top brands use Facebook for different purposes;
Coca-Cola uses it to reach the youth market, Disney sells film tickets, and McDonald's uses it to introduce products nationally (Yi Chung et al 2010).
Although we see such influence by social networks, businesses remain uncertain on the value of investing in social networking. On the one hand, people believe that social networking can be beneficial for communication, product selling, image building, and customer services. On the other hand, reports (http://blog.shanger.net/
2009, Manpower 2010, eMarketer 2010,
http://techorange.com/ 2011) have detailed
enterprises losing interest in maintaining communication with customers through social networks; some enterprises (TEEMA 2010, Chen 2011) believe that social networks generate limited benefits. These businesses (Hiscox 2011) do not believe it necessary to maintain a social network presence and invest too much effort into it.One explanation for the hesitation to invest in social networking is that firms may not manage well the interactions with customers on social networks. In fact, certain firms that have invested in social networking have concerns on what to invest and how to measure the capability of managing the social network. With the uncertainty of both the capability of managing social networks and the possibility of the social networks’
effects, building a clear understanding of the management and impact of this type of platform is necessary.
1.2 Research motivation and research question
The research objective is to determine the relationship between the capability of managing social networks and the impact of social networks on business performance.
To understand clearly the effect of social networking, we chose enterprises’ fan pages on Facebook as the study field. Facebook is currently the most popular and functional social network (Nielsen 2010), and Facebook created pages for enterprises to invite
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users to become members of their fan page, and member users can show friends their product/service preferences and recommend them by adding Pages to their personal profiles (Facebook 2011). The information is posted on the user’s wall and broadcasted to all friends. In addition, users can view friends’ joined fan pages and be aware of their interactions on these fan pages. For enterprises, a fan page can
send updates to an unlimited number of people, and help enterprises keep up with customers (Direct Creative 2011).
To verify the effectiveness of fan pages on Facebook, this research uses four- stages of empirical study. The first stage is to build general findings by selecting 16 global cases and collecting their fan page information through publicly available data sources, including fan page performance from Facebook insights and annual revenue reports and examining the relationship between these two items. The second stage is to verify the fan page effect by total revenue of 58 global enterprises; the third stage is to verify the fan page effect by total revenue of 11 firms in Taiwan, and base on the finding, some interesting differences in the various industries have lead us to test the benefit hypotheses in greater depth in telecommunications, airline, banking credit cards and convenience store in forth stage, to seek patterns of benefit generation in the different dimensions.
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