The document presents research on the relationship between a company's Facebook likes and its net income. It examines this relationship with moderating variables like business type (B2B vs B2C), business age, and business size. The results found no direct relationship between likes and income but found likes were significantly related to income for smaller businesses and B2B firms. Younger age was not found to moderate the relationship. The research suggests social media marketing can benefit firms depending on variables but likes do not automatically translate to profits. Future research could examine other platforms and privately-held companies.

1. Relationship Between Facebook Likes and Net Income Including Moderating Effects
Introduction
Everyday, accordingto FacebookNewsroom (2014),Facebookhas1.04 billionactive readers,
on average.Witharound7 billionpeople onthe Earth,that means thaton average that 1 out of every7
people onearthaccessFacebookonany givenday.Asof December2015, Facebookboasts
approximately1.59 billionactiveuserspermonth.Fora companythat wasstartedin 2004, this isan
amountof growththat fewcan rival.Withthe explosive growththatFacebookhasenjoyedandthe pure
numberof the site’susers,itshouldcome asno surprise thatFacebookhasattracted the attentionof
otherbusinessesformultiple ways.
On Facebook,businesseshave the opportunitytocreate companypagesthatcan be likedby
consumersinorderto conveymessagesfromthe company.Social mediahasbecome anew hottrendin
marketing,akindof holygrail where a message canbe delivereddirectlyfromthe company’spage to
thousands of consumers,if notmore. Social mediaisinexpensive,transparent,andimmediate.Itcan
give consumersinstantmessagesfromacompanydirectlytoa mobile device oracomputer.Another
draw isthat insteadof needingcustomerstoseekinformationfrom acompany,the customerscome to
the company,eagerto hearwhat theyhave to say.
That beingsaid,notall marketersare hoppingonthe social mediamarketingbandwagonjust
yet.Asnice as a “Like”ison Facebook,how doesthatactuallyapplytoa company’sbottomline?Sure,
reachingcustomersisnice,butbusinessesrunonprofits,notsocial mediaattention.There issome
skepticismastothe amountthat social medialikesactuallyhelpacompanyto generate aprofitat the
endof the day.That is whatthe researchpresentedinthisreportaimstoaddress;whatkindof
relationshipisthere betweenacompany’slikesonFacebookandthe company’snetincome?Inthe
followingsectionsthe previousresearchandmodel usedtostudythistopicwill be presented,followed
by the methodologyof thisstudy,continuingontoa discussionof the findingsof the study,andthen
finallyendingwiththe limitationsof the studyandsome possibleresearchdirectionsinthe future.
Background
Since social mediais a relativelynew areaof study,especiallywithinthe marketingrealm,there
isno consensusaboutthe relationshipbetweenFacebooklikesanda business’sperformance.Anarticle
writtenbyJimEdwards(2013) showedvariousstudiescitingthata like canbe valuedanywhere
between$214.81 perlike fora non-profitorganizationaccordingtoresearchconductedbyBlackbaud,
NTEN,and CommonKnowledgein2012 to nothingaccordingtoa studyconductedbyCoca-Colaas
reportedbyJoe McKendrick (2013).
There are some thatbelieve thatthe amountof social mediaattentionacompanyhasis
positivelyrelatedwiththe performance of thatcompany.JimEdwards (2013) reportsresultsfroma
numberof differentstudiesthatattribute adollaramountgeneratedforacompanyperindividuallike.
However,thisnumbervariesbetweenstudies.Forexample,astudybyenterprise social media
marketingcompanySyncapse in2011 foundthat the average Facebookfanisworth$136.38 more to a

2. companythan a non-fan.Othercompanieshave foundvaluesforalike thatvaryfrom that number
wildly.A platformforcompaniesneedingagroupbuying/flashsale platformcalledChompOnvalueda
like at$ 8.00 in 2011. A differentsocial mediamarketingmanagementfirmcalledVitruefoundin 2010
that a fan on social mediaisworth$3.60. Edwards’ article goesonto mentionotherstudiesthatvalue
likesatevenloweramounts.
Otherstudieswoulddisagree withthe dollaramountsstatedbythe studiespreviously
mentionedandwouldclaimthat social mediaactuallyhasnoeffectonacompany’sperformance.The
previouslymentionedstudybyCoca-ColareportedbyJoe McKendrick(2013) lookedatthe company’s
short termsalesrelative tothe amountof buzzgeneratedonsocial media.Atthe conclusionof the
study,Coca-Colacouldfindnostatisticallysignificantchange inshorttermsalesas a resultof social
mediabuzz.
Andthere are of course otherstudiesthatlie somewhere inbetweenabsoluteresultsof social
mediaeitherhavingadefinite relationshiponperformance orsocial mediahavingnoimpactonfirm
performance.These studiesfoundthatsocial media could have animpacton a business’sperformance if
usedinthe correct mannerto boostperformance. HadleyMalcolmreportsthatin2012 for the Black
Fridayshoppingweekend,firmsincreasedsocial-mediacampaignsby40% but yetonlysaw an increase
by lessthan1% for online trafficandsalesmade upbysocial mediaonthat BlackFriday.The pointof
the article wasn’tthat social media isanineffective waytoboostsales,butratherthatwhenused
effectively,social mediacanbe usedto improve salesinothermediums.
The study showedthatmanycompaniesare usingsocial medianow toboostbrandawareness
rather thanto directlyaffectsales.Inthisway,itmaybe more difficulttogauge a directlinkbetween
social mediaanda firm’sprofitwhichisan issue thathashistoricallyplaguedmarketing.Social media
has alsobeenusedbycompaniestoinformfansof differentpromotionsandgiveawaysthatthe
companyisoffering.Itappearsthatmost companiesprefertouse social mediajusttostayintheir
customers’mindsbecause theyfigure beingthoughtaboutispreferable tonot.
For the researchpresentedinthisreport,the aimwasto compare Facebooklikestoafirm’s net
income andsee if there isa statisticallysignificantrelationship. Since there issomuchdispute onthe
value of a Facebooklike,there isapossibilitythatthe value of alike onFacebookisreliantonanother
variable.Totestthispossibility,thismodel includesmoderatingvariablesdesignedtotestwhetheror
not there are othervariablesare significantindeterminingthe value of alike onFacebooktoa firm.The
moderatingvariablestestedinthismodelisbusinesstype (whetherthe firmisB2B or B2C),business
age,and businesssize.
Figure 1
Facebook Likes Income
H1: Stronger Relationship in B2C

3. H2: Stronger Relationship in Younger Companies
H3: Stronger Relationship in Smaller Companies
It isexpectedthatthe researchwouldshow thatthe amountof Facebooklikesthatabusiness
has wouldhave amore significantrelationshipwiththe firm’sperformanceif the firmsellsdirectlyto
consumersratherthanbusinessessincegenerallythosewhowouldlike acompanyonFacebookwould
be a customer.The relationshipbetweenFacebooklikesandafirm’srevenue isalsoexpectedtobe
strongerina youngerfirm,because thesefirmswouldbe lessestablishedandwouldlikelyneedto rely
more on buzzand attractingnewcustomersthroughinexpensive means.Andalso,smallerbusinesses
wouldbe expectedtohave astrongerrelationshipbetweenFacebooklikesandrevenue because a
largerbusinessislikelywell-establishedwithawell-establishedcustomerbase anddoesn’tneedto
attract newcustomersusingsocial media.
Method
For thisresearch,a multiple regressionwasrunbothwithandwithoutthe moderatingvariables
to see the effectof Facebooklikesonfirmperformance,measured byfirmincome. The sample came
from188 publicly-tradedcompaniesinthe UnitedStates.10Kreportswere accessedviaMergentonline,
and Facebooklikeswere foundbylookingupthe companyonFacebook. A dummyvariable wasusedfor
businessmodel,inwhichB2Bcompaniesare representedbya0 and B2C companieswere represented
by a 1.
In the firstmodel,the relationshipwasmeasuredbetweenFacebooklikes,assets,andrevenue
and a firm’snetincome viamultipleregression.Facebooklikes,assets,and revenue werealsomeasured
relative tonetincome inthe second,third,andfourthmodels,butthese modelsalsoincludeda
moderatingvariable.The secondmodel includedFacebooklikesmultipliedbythe dummyvariable for
B2B or B2C to determine whetherthe type of businessmakesadifferenceinthe relationshipbetween
Facebooklikesandnetincome.The thirdmodel includedavariable multiplyingfirmage byFacebook
likes,andthe fourthmodel includedavariable whichmultipliedFacebooklikesbynumberof employees
to see the effectof firmsize onthe model.
The resultsof thisstudywere not exactlyasexpected. ItwasexpectedthatFacebooklikes
wouldbe relatedtoa firm’sincome whenasa resultof othervariables,whichwasmostlysupportedby
thisstudy.The resultsshowednostatisticallysignificantrelationshipsimplybetweenFacebooklikesand
firmperformance. ItwashypothesizedinH1 thata firmthat sellsdirectlytocustomersratherthanto
otherbusinesseswouldhave astrongerrelationshipbetweenFacebooklikesandfirmperformance.This
researchdidnot supportthishypothesis,andactuallyshowedastatisticallystrongerrelationship
betweenlikesandfirmperformance if the firmsellstobusinessesratherthanconsumers. Itwasthen
hypothesizedinH2 thatyoungerfirmswouldhave astrongerrelationshipbetweenFacebooklikesand
performance.Thishypothesizedwasn’tsupported,asthe researchshowednostatisticallysignificant
difference inperformancebasedonFacebooklikescombinedwithfirmage.H3 hypothesizedthatthe

4. relationshipbetweenFacebooklikesandperformance wouldbe strongerinsmallercompanies.This
hypothesiswassupportedinthe research,whichshowedasignificantrelationshipbetweenFacebook
likesandfirmnetincome insmallercompanies.
The resultsof thisresearchsuggestthat Facebooklikescanbe anindicationof firmsuccess,
dependingonthe size andtype of the firm.Itwas foundthatFacebooklikesare significantfora younger
firmto measure success,aswell asfora B2B firmrather than a firmthat interactsdirectlywith
consumers.
Discussion
The resultsof thisresearchwere somewhatsurprising,basedonthe hypothesisgoingin.Itwas
assumedthatmoderatingvariableswouldhave aneffectonthe relationshipbetweenFacebooklikes
and firmperformance,andthatideawassupportedbythisresearch.However,itwasalsoassumedthat
a firmthat sellsdirectlytoconsumerswouldhave astrongerrelationshipbetweenFacebooklikesand
revenue.Thisideawasnotonlynotsupported,butthisresearchshowedasignificantrelationshipthat
was exactlythe opposite.It’sdifficulttodeterminewhythiswas,butitcouldbe simplyattributable to
an error insampling.
Goingin to thisresearch,there wasalsoan expectationthatyounger firmswould show a
strongerrelationshipbetweenfirmperformance andFacebooklikes.Thisalsowasnotsupportedbythe
researchwhichwassurprisingbecause itwashypothesizedthata youngercompanycouldbenefitfrom
inexpensive anddirectmarketingto a massof consumers.Thissame mindsetappliedtothe assumption
that smallerfirmswouldshowastrongerrelationshipbetweenFacebooklikesandperformance.This
was supportedbythe research,suggestingthatfora small firm, Facebooklikescanhave a greater
impacton firmperformance thantheywouldona largerfirm.
Facebook Likes Facebook Likes x
B2C
Facebook Likes x
Age
Facebook Likes x
Number of
Employees
Coefficients 8.501531232 -8935.187812 0.829529917 -0.000259472
Standard Error 8.306694869 1538.946789 0.428365331 8.19313E-05
T-Statistic 1.023455341 -5.806040778 1.936501059 -3.166947874
P-Value 0.30744361 2.81759E-08 0.054363717 0.001808186
Adjusted R-Square 0.623521816 0.679367619 0.627088008 0.677965222

5. Thisresearchis of importance tomarketersbecause itappearssocial mediaishere tosayand
eventhoughmanycurrentmarketerssee the potential of whatsocial mediacanmeanfor marketing,it
isstill unclearhowtoprofitoff of social media.ThisresearchshowsthatFacebooklikesaren’tsimply
convertedtoprofitautomatically.Dependingona numberof variablesFacebooklikescouldbe
beneficial forthe firmormeannothing.Thisimpliesthatsocial mediacanbe usedinmarketing,butthat
withthe rapidexpansionof social mediathatmarketersneedtohurryto keepupand findnew waysto
maximize the effectof social mediamarketing.
Limitationsand Future Research Directions
There isa possibilitythatsamplinghadaneffectonthe resultsof thisresearch.One possible
source of samplingbiasisthatthe onlyfirmsthat couldbe accessedforthisstudyare firmsthat are
publiclytraded.Privatelyownedfirmsmayhave yielded differentresults.There were alsoafew larger
companiesorcompanieswithverylarge social mediapresencesthatwere outliersandcouldhave had
an impacton the data.
Goingforward,there isa lot of potential forfuture research.Of course,othersocial media
platformssuchas Twitteror LinkedIncouldprovideinterestingresultstosee if similarresearch
conductedonthose othersiteswouldyieldsimilarresults.Also,I’dliketoknow how thisresearch
comparesto privatelyownedcompanies,if thatfinancial informationsomehow becamemade available.

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