Exploring the relationships among paid search budget, social media presence and online performance: An examination of the US e-commerce industry

Abstract

Digital and social media marketing activities are vital to fostering consumer engagement, nurturing consumer–brand relationships and generating market intelligence. Yet the relationships among firms’ digital marketing investments (eg paid search budget), social media presence and online firm performance are not well understood. This study focuses on the US e-commerce industry, identifying segments of the top 500 US e-commerce firms based on their paid search budget, social media presence and e-commerce performance measures, such as their web traffic, web sales, conversion rates and average ticket sizes. It then explores the relative impact of paid search budget and social media presence on e-commerce performance. Results show that there are two clusters of e-commerce firms: high spenders with high presence and low spenders with low presence. While the former constitute only 5 per cent of the industry, they have 27 per cent more repeat customers, three times higher return on investment, and make half of the industry’s web sales. Results also show that compared with social media presence, paid search budget is three to four times more effective in driving web traffic and eight times more effective in driving web sales. The results provide important strategic implications for marketing and brand managers for their digital marketing investments and social media presence.