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The power of popularity: how the size of a virtual community adds to firm value

Authors


Kirk Plangger, Beedie School of Business, Simon Fraser University, 500 Granville Street, Vancouver, BC, Canada, V6C 1W6.

E-mail: kirk_plangger@sfu.ca

Abstract

Customers are increasingly consuming and talking about products and services on online social networks. Thus, these online brand communities have become more important to marketers in their quest to increase future sales through loyalty and customer acquisition. Social media environments, such as Twitter and Facebook, seem to increase consumer loyalty by increasing the popularity of the brand, allowing marketers another way of differentiating. This paper fills a gap in the marketing literature by examining the effect of online brand communities on firm value by using information from the 2010 and the 2006 editions of the Fortune 500 listing as well as key statistics from Facebook and Twitter. The regression models presented show that there is a positive relationship between social media investment and firm value, especially in mature, highly competitive industries, especially for business-to-consumer industries. Copyright © 2012 John Wiley & Sons, Ltd.

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