Social Networking Sites: An Academic Approach to Revenue Generation


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This study discusses social networking sites and its potential of generating revenue if word-of-mouth communication is factored into a business marketing plan. With academic research and an independent study analyzing buyer behavior and the usage social networking sites, discussion is based on the discovery of word-of-mouth communication and its effects when distributed through social networking sites. Because word-of-mouth is proven as the most effective type of communication to influence buyer decisions and the type of communication travels quickly and successfully through social media, we prove social networking sites can influence revenue generation for businesses.

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Social Networking Sites: An Academic Approach to Revenue Generation

  2. 2. SOCIAL NETWORKING SITES: GENERATING REVENUE 2 ABSTRACT This study discusses social networking sites and its potential of generating revenue if word-of-mouth communication is factored into a business marketing plan. With academic research andan independent study analyzing buyer behavior and the usage social networking sites, discussion isbased on the discovery of word-of-mouth communication and its effects when distributed throughsocial networking sites. Because word-of-mouth is proven as the most effective type ofcommunication to influence buyer decisions and the type of communication travels quickly andsuccessfully through social media, we prove social networking sites can influence revenue generationfor businesses.
  3. 3. SOCIAL NETWORKING SITES: GENERATING REVENUE 3 Social Networking Sites: Can It Generate Revenue for Businesses? INTRODUCTION “Social media has transformed our world into one great big small town, dominated, as all vibrant towns used to be, by the strength of relationships, the currency of caring, and the power of word of mouth (Vaynerchuk, 2011).” Facebook, Twitter, LinkedIn, Orkut, MySpace, and a decade of social media sites: Welcometo the age of social networking. It has scaled back interpersonal communication. It has broughtfamilies across thousands of miles together. It has changed the way marketing should reach itscustomers. During the downturn economy and the maturity of social networking sites, thousandshave claimed to be “social media experts” and millions shared ideas to influence buyers and theirpurchasing powers. Business organizations either embrace or struggle with social networking sitesduring their strategic marketing development and the principals of social media’s effectiveness havebeen informally established. Social networking sites are fast paced in development and are quick when transitioningthrough the product life cycles. Return on social media investments are tough to track from a returnon investment perspective. Standard tools of measuring revenue cannot effectively measure word-mouth-messaging too. The inspiration for this research came from these struggles. In this study, fundamental ideals of social networking sites are discussed in an academicsetting. Since academic research can be outdated if implemented with standard business revenuefigures or product performance analysis, the research is based on the ideology of word-of-mouthcommunication and the science of its communication. With business principals aside and scholarly journals presented, we answer the question ofsocial networking sites and its potential to generate revenue for businesses. Discussed is the idea ofconsidering social networking sites as a part of the overall marketing strategy to improve productsales.
  4. 4. SOCIAL NETWORKING SITES: GENERATING REVENUE 4 Using journals from advertising, marketing, computer-mediated communication andconsumer research, we divulge into social networking sites and their influence on word-of-mouthcommunication. We combine research from respected social media bloggers and newsorganizations. Reading further, no form of reputation management reports or ROI figures arepresented due to the confidentiality of businesses presenting the data and the lack of principals andempirical evidence these reports may have. RESEARCH: INDUSTRY WRITINGS AND ACADEMIC JOURNALS A challenge during the research and analysis was presenting a definition for “social media” inan academic setting. After finding many journals in communication, computer-mediatedcommunication, marketing, and advertising, social media is referred to as social network sites (SNS)in most studies. Boyd and Ellison (2008) define social networks as internet based service productsthat allow people of all languages to: “Construct a public or semi-public profile within a boundedsystem, articulate a list of other users with whom they share a connection, and view and traversetheir list of connections and those made by others within the system.” By defining socialnetworking sites, research shows SNS are the communication channel for word-of-mouth (WOM)messaging. With SNS’s fast moving transfer of information, the evolution of a network is faster thanmost product life cycles. Networks developed quickly to compete, resulting in a plethora of SNS’sdeveloped in the last decade. Boyd and Ellison (2008) compiled launch dates of major SNSs since1997. They credit that SNSs are like many major trends that come and go, so to compile a history ofsocial sites can be incomplete. The timeline (Appendix A) and study explains how methods andtactics of social networks led to growth and longevity. Boyd and Ellison critically analyze eachpopular SNS, like MySpace and Friendster, and discuss the true successes and failures to each.
  5. 5. SOCIAL NETWORKING SITES: GENERATING REVENUE 5 Current events prove the status quo of SNS product cycles true. During the time theresearch period, Facebook made major advancements over the last few years. Boyd and Ellisonnoted Google as a popular search engine but did not consider them as a SNS (2008). However,within days of conducting research, Google+ was introduced and now directly completes withFacebook (Parr, 2011). From a methodology that compiles the U.S. Census Bureau and surnamesof Google+, there is a “guesstimation” of 9.5 million users worldwide (Schroeder, 2011) on the SNSthat is known as the “Facebook Killer” (DeRosa, 2011). The amount of users is incomparable tothe largest SNS in the world, Mark Zuckerberg, CEO of Facebook, announced thatthe networking site has reached over 750 million users (Ehrlich, 2011). Word-of-mouth communication (WOM) has been proven to generate revenue for businessorganizations that chose to position this type of messaging within their marketing strategies. Authorsof the first survey-based results prove that WOM is seven times more effective than printadvertising in influencing consumers to switch brands (Katz & Lazarsfeld, 1955). Trusov, Bucklin,and Pauwels (2008) compare the effects of WOM to traditional marketing channels. Their firstresearch shows how WOM overcomes consumer resistance with low costs and fast delivery.(Trusov, et al., 2008). Their research focuses on the model of sharing ideas and passing onrecommendations known as the referral model. After placing various variables as mediaappearances, traditional promotional mediums, and SNS WOM communication, WOM referralshave a very strong impact on new customer acquisitions. Several other interesting pieces of research came from the test. Trusov et al. (2008) showedhow WOM enhanced traditional marketing strategies within paid incentives behind WOM messageswas considered “fertilized” word-of-mouth and could be less effective than organic word-of-mouth.Results from the quantifiable research show that WOM through an Internet social network setting is
  6. 6. SOCIAL NETWORKING SITES: GENERATING REVENUE 6a critical factor for firms seeking to acquire new customers. WOM can have longer lasting effectsthan traditional marketing techniques (Trusov et al., 2008). Chatterjee summarizes the recommendation and referral behavior of users on SNS’s. As thestudy discovers the user implications for referrals, Chatterjee identifies the purchasing decisions ofconsumers when they voice opinions on SNS (Chatterjee, 2011). The author shows how managersof new brands choose influential individuals in SNS about their product based on informationprovided to the SNS during registration. (Watts & Dodds, 2007). Current proof of the effectivenessof this method is the Klout measuring tool. Klout combines user data and sophisticated algorithmsin the web programming to measure the reach and potential capability to generate conversations andreach across the internet. (Hotchkiss, 2011) Further research reviews clickstream data, such as pageviews, users, and clicks, on new product advertising campaigns over a 21-month period and tries todetermine the drivers. The writings became extensions of referrals and recommendations and showhow its impact is equally important. Other interesting research shows how SNS can affect services that are intangible at purchase.Livintin, Goldsmith and Pan (2006) conducted a study an early stage of the travel and tourism e-marketing boom and used SNS case studies from sites like The authors discusshow interpersonal communication has been a crucial part of the tourism industry and how positiveand negative WOM upon tourism products. Livintin et al., (2006) provide specific case studies ofhoteliers and destination marketers that have been successful in managing their WOM onlinethrough specific types of mediums, including blogs, e-newsletters and their own brand websites.The authors have also reported that 67 percent of US Travelers have used the Internet to search forinformation for travel plans and that 41 percent of US Travelers have booked via the medium. METHODOLOGY
  7. 7. SOCIAL NETWORKING SITES: GENERATING REVENUE 7 Since the topic was based on social networks, current SNS’s were the avenues to distributethe survey. GoogleDocs was used as the survey collection tool, and the web based software trackeddates and times and collected the answers effectively. The online real-time document editor workedexactly like Microsoft Excel and did not track IP address. This ensured security and privacy forsurvey takers. Radio buttons and check boxes were programmed into the survey to help populateanswers and compile unaltered graphs based on the raw data. The data was not cleansed and wasfiltered unless used for specific geographical research. Released with a timeframe of two weeks, the survey went out to 1,224 Facebook users, 369LinkedIn connections, and a network of 1,349 Twitter followers. In total, 2,942 individuals wereexposed to the call-to-action of the survey. When released on Sunday, June 26, 2011, 34 responseswere received within the first hour. After 24 hours, 182 responses were received (Appendix B). In total, over 238 responses were received and 8% of the entire network responded withintwo weeks. Surveyors were predominantly led from Facebook and LinkedIn. As the introduction ofthe survey mentioned how anonymous the survey would be, individuals who took the surveypublicly and privately notified the surveyor of their participation. Though the source of origin wasnot noted by GoogleDocs, two individuals tweeted their participation on Twitter, 18 individuals senta message through LinkedIn noting their participation in the survey, and 96 users noted theirparticipation through a user event comment on Facebook. A second survey was conducted to gather qualitative analysis behind buyer decisions basedon WOM. In further understanding the opinions of online review site readers, questions weretargeted to deeper understand credibility, legitimacy, and the foundation of buyer opinions.Reaching out to the same sample set through Twitter, Facebook, and LinkedIn, 33 respondentsreengaged their thoughts through GoogleDocs. However, the first call-to-action for the survey was
  8. 8. SOCIAL NETWORKING SITES: GENERATING REVENUE 8unsuccessful. When asked for social repetition, the method of retweeting and passing the samemessage along, the word-of-mouth helped garner responses in two days. RESULTS In marketing, buyer behavior is influenced by personal and intrapersonal influences(Sandhusen, 2008). Questions were asked to clearly define influences upon behavior as well as SNSpreference. In this study, “brick and mortar stores” are defined as retail establishments with aphysical location. “Online retailers” are internet websites that offer retail products and point-of-salepurchases are conducted through an online processing tool. Those surveyed had conducted inonline retail purchases at least once a month. Often purchased goods were gifts, electronics,clothing and business products. Brick and mortar stores were shopped by surveyors several times aweek. Surveyors said their most frequent purchases were mostly perishable goods. A crucial piece to the study was the evaluation of participation and level of socialengagement for survey subjects. If there were low levels of participation on SNS’s from surveyors,the study would not have concrete evidence to support the thesis. 98% of those surveyed had aFacebook profile, while LinkedIn, Twitter and MySpace were other common social networks. Manyothers had accounts on social media platforms that have larger amounts of international uniquevisitors, including Multiply (2%), Hi5 (3%), and Orkut (2%). In total, 6% of those surveyed hadaccounts on social networks with small or niche types of users. However, when asked about socialmedia sites used on a daily basis, 94% of surveyors use Facebook while Twitter is used by 44% ofthose surveyed. LinkedIn came third as most frequently used on a daily basis (25%). To better gage personal influences on buyer decisions, questions were asked to evaluatefamily and friend influence. When asked the question of family participation on social media, 88%of individuals said their family was active on social media. 41% of individuals said their familiesinfluence their purchasing decisions online or in person. When asked if their friends are active
  9. 9. SOCIAL NETWORKING SITES: GENERATING REVENUE 9participants on social media, 97% said yes while only 3% said no. 42% of individuals surveyed saidtheir friends purchase decisions online or in person. Out of those surveyed in New Mexico, 60%said their families do not heavily influence purchasing decisions. Three other important questions that measured trust and influence on word-of-mouthcommunication sites or sites driven by WOM content had various percentages as a result. Whenasked “How often do you read online websites that allow users to review or post comments about aproduct or service?” on a numeric scale, (1 being very rarely, 5 being very frequently) 61% of peoplefrequently (4 and 5 rating) visited sites. However, when asked about the perception of influenceonline commentary and review sites have upon products or services, 68% of those surveyed said theremarks were influential (4 to 5 ratings). To best gage the medium of communication that is most influential for those surveyed,advertising communication outlets were listed, and those surveyed were asked to choose the mostinfluential form of advertising. The majority noted “word-of-mouth” advertising as the mostinfluential. Several issues came about that potentially skewed the survey results. Because of the amountof people that responded to their participation in the social media survey, the question ofanonymous identities came into play. Also, two complaints were received by a surveyor that couldhave potentially confused the entire sample set. One individual said one question was confusing,while the other suggested that other social media sites were missed on the questionnaire answeroptions. The follow-up survey was based off of two questions that were asked previously: “Howoften do you read online websites that allow users to review or post comments about a product orservice?” and “How much influence do the online comments or reviews have upon your product orservice?” On the first question regarding the websites, surveyors were asked about the importance
  10. 10. SOCIAL NETWORKING SITES: GENERATING REVENUE 10of website credibility. All but two individual users responded yes. Surveyors said their opinion onlegitimacy of reviews was based on the size of the website, user ratings presented on the site, and thelegitimacy of the sites. When those surveyed mentioned about the size of the website, there were nodetails or specific characteristics of visitors, inventory, or influence that was measured. (Appendix B)The one respondent that answered “maybe” does not weigh the opinions of others on his buyingdecision if the potential product is of small dollar value. The negative respondent did not go intodetail as to why they do not think about the credibility. It was important to understand buyer perception of the legitimacy of the reviewer. The mostcommon reason for user authenticity was the use of language. Spelling and grammar, professionallanguage and descriptive writing were the most credible reviews to those surveyed. Staying free of“marketing-speak” and showing knowledge of the product or service through detailed imagery gavepotential buyers confidence in users on SNS. The amount of balance and details were alsoimportant to those surveyed, and some were even leery of perfect reviews without any criticism.Few mentioned that assurance in a user review came from the user sign-up process, photos taken bythe user, and the number of reviews posted by an individual. Respondents were asked if descriptive reviews help formulate less or more of an opinion onthe establishment if reviewed (Appendix C). Only 73% of those resurveyed said more descriptivereviews help formulate an opinion, but varied in why descriptive reviews helped formulate anopinion. Surveyors said too many details made products or service less appealing, detailed reviewswere beneficial for products rather than service, and persuasive language were less important andinfluential. Any type of marketing message detracted potential buyers from the review. When asked if products or services are purchased if it has one or more negative reviews, aresounding yes came from surveyors. Many said it was inevitable to have a negative review.However, half of respondents mentioned that it depended on the review’s content, descriptive
  11. 11. SOCIAL NETWORKING SITES: GENERATING REVENUE 11nature, and attention to detail. Surveyors also mentioned that buyer decision is affected by thenumber positive reviews. In the collection of online reviews in one product or service, positivereviews must outweigh the number of negative reviews. A few surveyors mentioned that the buyer’sdesire for the product can outweigh any review. Surveyors were asked “Do you write negative reviews on a product or service you areunhappy with? If so, to what extent of discontent do you write a review?” The surveyors haddiversity in answers. Many of them write negative and positive reviews, but must have a highlyqualifying circumstance and strong experience to drive them to write a review. Others would writehow the product or the service did not meet their expectations. Some respondents said they mustdescribe the experience in a balanced and direct way with much detail to the product or serviceexperience. Surveyors said they respond to negative reviews by offering recommendations on howto make the products and services better. DISCUSSION Because this survey had a vast amount of New Mexicans answering to the research survey,the application of trust in a recent study was pertinent. According to the Garrity Group studyfocused on New Mexicans and their trust perception (2011), family members and relatives were thehighest group noted as trusted resources (85%). During the independent research study done tomeasure influence and buyer decision, those surveyed reported a low amount of influence byfamilies. Even with the contrasting higher numbers of trust in family, SNS’s can be an influentialmedium of WOM communication to gain consumer trust during the purchasing decision process. Fascinating are the SNS’s in the market today: they are quick to evolve and stay competitive.The research became interesting as WOM traveled quickly to collect quantitative and qualitativeresearch data. Even as new SNS’s are developed and current industry leaders keep reinventing theuser interfaces and experiences, we see that SNS’s are effective as a medium to share WOM.
  12. 12. SOCIAL NETWORKING SITES: GENERATING REVENUE 12Though we do not show any type of return on investment data to prove the financial advantages ofSNS spreading WOM, the principals discussed is enough to garner a strategic plan forcommunicators and marketing professionals. One important fact discovered that is advantageous for businesses are the presentation ofWOM: potential buyers are influenced by several different factors in order to take action onpurchasing. They are influenced by family and friends, website presentation, proper linguistics andonline site credibility. When businesses do not take these principals into account in their socialmedia strategy plan, organizations may not have a successful social media strategy. Finally, we come to the conclusion that WOM is the most effective type of communicationto influence buyer decisions. Proven through academic research, the survey conducted, and businessdata that could be compiled, WOM should be highly regarded. Because WOM is the most effectivetype of communication to influence buyer decisions, and word-of-mouth messages travel veryeffectively though social networking sites, SNS’s can influence buyer decision and generate revenuefor businesses. It is up to marketers and businesses to develop their strategies to monitor andinfluence customer WOM.
  20. 20. SOCIAL NETWORKING SITES: GENERATING REVENUE 20 APPENDIX C Does the credibility of the website matter to you? maybe no 3% 3% yes 94% Do descriptive reviews help you formulate less or more of an opinion on the establishment reviewed? depends 10% less 17% more 73%
  21. 21. SOCIAL NETWORKING SITES: GENERATING REVENUE 21 REFERENCESBoyd, d. m., & Ellison, N. B. (2007). Social network sites: Definition, history, and scholarship. Journal of Computer-Mediated Communication, 13(1), article 11., P. (2011). Drivers of new product recommending and referral behavior on social network sites. International Journal of Advertising, 30(1), 77-101. Retrieved from EBSCOhost.DeRosa, A. (2011, June 30). Is Google+ a Facebook killer or another Google wave? Retrieved from another-google-wave/Ehrlich, B. (2011, July 06). Facebook hits 750 million users. Retrieved from Group, The. (2011). The Garrity perception survey. Albuquerque, New Mexico: htttp://, P. (2011, February 15). Taking Klout scoring to the next level. Retrieved from, E., & Lazarsfeld, P. (1955). Personal Influence. New York: The Free Press.Parr, B. (2011, June 28). Google launches Google+ to battle Facebook. Retrieved from, L. R. (2008). Marketing. Barrons Educational Series.Schroeder, S. (2011, July 12). Google+ about to hit 10 million users [report]. Retrieved from
  22. 22. SOCIAL NETWORKING SITES: GENERATING REVENUE 22Trusov, M., Bucklin, R. E. and Pauwels, K. H. (2008, April 24) Effects of word-of-mouth versus traditional marketing: findings from an internet social networking site. Robert H. Smith School Research Paper No. RHS 06-065.Vaynerchuk, G. (2011). The Thank You Economy (p. 11). Avon. Kindle Edition.Watts, D.J. & Dodds, P.S. (2007) Influentials, networks, and public opinion formation. Journal of Consumer Research, 34(4), pp. 441