Social Media Marketing: What’s It Worth?
Social media’s just really recently taken off as a marketing channel. So what we’re seeing is that sort of on surveys among CMOs, they say, right now, social media’s about 10% of marketing budgets. In 2018, it’s projected to be 20%. We’re seeing that increasing amounts of marketing dollars are getting shifted from more traditional channels towards social media more broadly.
So this would involve both advertising through social media marketing, as well as firm trying to can a foster consumers to talk about their brands by providing platform reviews, by sometimes responding to them and does it a lot of ways which try to do it. So seem that channel and if you ask CMO is about 64% of CMO’s is think word of mouth, online word of mouth is one of the most powerful marketing channels in the future.
But at the same time, it’s actually not that well understood how quantitatively strong these effects can be, and that’s where our study comes in. What we try to look for is, if you will, an external shock to the system, something that changed how much people were talking about a particular product or brand, that wasn’t related to any underlying characteristics of the brand.
So if we wanted to avoid us that more people are talking about a brand because more people bought it in the past. So essentially the talking about is a result of the sales, but we want to establish is that whether talking can actually lead to more future sales in that realm. And that’s usually hard to do.
Looking At Other Sources
We look at Sina Weibo which is the Chinese equivalent of Twitter if you will. A very similar type of platform. Twitter itself is blocked in Mainland China so it cannot be used. So Sina Weibo emerged as a substitute for that. And what happened is that in 2012, following a political scandal, Sina Weibo was partially blocked for 3 days and so what we’re going to investigating is we’re going to look at TV shows.
A lot of them have a very active following. A lot of them are aired at a daily level, so we see every day people talk about these episodes then they watch it at night. Then suddenly for three days lot of this activity is gone due to this external influence, which is the censorship event that’s coming from the government.
So essentially looking at that something happened to show us that tended to have a lot of following and suddenly disappears during those three days, do we see that being reflected in their viewership numbers? So the censorship event helped us a lot in pinning something down that’s otherwise very hard to do. So most studies prior to that.
Usually it’s something like relating sales of a product to the number of Tweets pertaining to the product, maybe from the previous day or week, something to assure that’s not happening at the same time. But even then, it’s hard to know whether that’s the right attribution. So you might imagine again, the example that might be one high-quality product which constantly has a lot of sales and constantly has a lot of Tweets about it. social media marketing gold.
Anther product does not have that, and even if we look at temporal differences between sales and the microblogging that precedes that, that might still give us just a correlation rather than actual and impact of the microblogging, in a causal sense, onto the sales numbers. And there’s a lot of reasons to think that the, if you will, more naive approaches tend to overstate the effect.
So the incorrect measurement would tend to go towards overstatement rather than understatement of the effect, the reason being that probably the most sales reason is that the actual cause of a relationship could be from sales to word of mouth rather than the other way around. And this might be misattributed. So it could be the case that you sell the product a lot and
because a lot of people bought it they then go on social media and talk about it. So it’s really the sales that precede the word of mouth rather than the other way around which is what we want to establish. Now in our case, we can rule that out because the censorship event wasn’t based on sales numbers or anything, it’s really external to the system and its impacts micro blogging activity and
we can then trace through the effect of that on to sales. And we can be sure that that reduction microblogging does not originate from sales differences. Which would be the case if we just compare different products with each other. So what we find is that relative to the typical movement in TV ratings doubling the number, doubling micro blogger activity moves it by about 20% of the typical movement.
It happens from episode to episode, which coming from just one advertising channel in this realm is actually a fairly significant. The findings are significant in two ways. So one is, I think both intuitively for a lot of practitioners as well as in the prior literature, academic literature, we often thought these effects might be even larger than what we find.
So to the extent that firms are increasingly shifting their marketing dollars into those channels it’s very useful to know that maybe these effects might have been overstated and we have to be careful in sort of managing them.
Secondly it’s a realm where it’s just incredibly hard to study these effects because user dragged content isn’t under your control as a firm. So you can’t manipulate it in order to experiment around with it. So you actually have to resort to methods like the one that we’re using, which we call quasi-experimental. We’re not doing the experiment ourselves, but we have something that is almost like an experiment.
The Chinese government, if you will, experimented for us by shutting it down for three days. They didn’t mean to shut it down for TV shows, but it so happened that it’s something that We can leverage to actually understand the affect. It’s a study that cautions a little bit against overstating. That is sort of the magic bullet in terms of marketing channels.
So it doesn’t seem like it’s clearly out performing other channels. So it seems to me if anything we still want to stick with a certain mix of marketing tools, rather, diverting everything into that realm.
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