The Emergence of Social Media and Its Impact on SME Performance

Introduction

In recent years, social media has increasingly attracted the attention of academics, researchers, practitioners, companies, and customers due to its affordability and the fact that it is a global tool (Aula, 2010). Social network sites can be defined as web-based applications on smart devices such as phones, tablets, iPads, lap tops and computers that allow users or organisations to create a public or semi-public profile about themselves, compile a list of users with whom they share a connection with in the case of individuals and a target market in the case of a company (Boyd & Ellison, 2008).

The introduction of social media tools such as Twitter, Bebo, YouTube, and Facebook. has been able to attract millions of users, many of which have integrated their daily practices with these sites and, therefore, giving businesses the chance of targeting and reaching millions of people through these sites with minimal cost. The first social network site launched in 1997 was called SixDegrees.com. This was followed by others such as AIM and ICQ, Hi5, MySpace, Friendster, and LinkedIn (Armelini & Villanuev, 2011). The various formats of social media include: photo sharing, blogs, wikis, social networks, video sharing, virtual worlds, social bookmarking sites and micro-blogging. These numerous formats have created a shift from the traditional one-way communication system according to Qualman (2012) and has changed, expanded, and broken the barrier of communication between companies and their respective consumers.

Social media is the latest invention which companies, consumers, businesses, Non-Government Organizations (NGOs) and government agencies are moving towards as it has the tendency to reach millions of people by just one click (Sunden, 2003). Sunden (2003) argues that despite the adoption of the Internet by companies and customers, SMEs are still struggling with how to effectively adopt and integrate social media into their business models and strategies.

The Internet has significantly changed the world and so has social media. In the early days of social media, MySpace was one of the emerging social media networks that supported celebrity activities in terms of promoting music and videos and it also made an impact on the entertainment world and businesses at large from music to movies. MySpace was later displaced by Facebook, which offered more features and benefits such as uploading photos, creating fan page, direct communication and interactions between celebrities and fans (Mandelli & Mari, 2012). The arrival of Facebook united millions of people around the globe, thereby giving organisations the insight and the realisation of being able to potentially capitalise on the fact that customers are just a few mouse clicks away (Mandelli & Mari, 2012).

The aim of this study is to critically analyse and assess the rapid emergence of social media and its impact on SME performance. Although performance indicators may vary between companies, depending on their priorities or performance criteria and may include profit, earning per share, and revenue per employee, but for the purposes of this study performance is defined as how well organisations are doing in terms of sales figures, market share and the value they deliver for customers and other stakeholders. In other words, to assess the true nature of a company’s performance with reference to social media, the criteria used in this study include, market share, reduced cost and improved sales, and brand building and awareness.

The study also aims to fill the gap in this area of study, as most of the previous studies have used quantitative method to gather information from companies whilst this study employed a qualitative approach consisting of face-to-face interviews with companies which engage with social media. Past studies also focused on big or multinational companies whilst this study focuses on small and medium sized companies. The study explores three research questions:

• RQ1: Is there a relationship between the growth of SMEs’ market share and the adoption of social media?

• RQ2: Do social media aid SMEs to improve sales figure?

• RQ3: Do social media help SMEs build or improve brand image and awareness?