Popularity Pays Off

Doctoral student Arthur O’Connor’s recent study evaluating the correlation between brand popularity across social media platforms, such as Twitter and Facebook, and companies’ daily stock prices is making waves.

Arthur O’Connor, a second year doctoral candidate in Seidenberg’s DPS program, recently spent 10 months investigating the relationship social media has with Wall Street—to some interesting results. O’Connor was able to show a strong correlation between the Internet popularity of three consumer brands and their stock prices. “There’s no such thing as a daily revenue count. Companies do quarterly revenue reports, so I used stock prices as a daily indicator,” explains O’Connor.

O’Connor partnered with Famecount.com, an independently run website that tracks and formulates statistical data from Facebook, YouTube, and Twitter. Famecount.com follows the trends of everything from nonprofits like the TED Conferences to entertainers like Eminem.

“I did the pilot study with Starbucks,” O’Connor says, “and there was a statistically significant correlation of fan count and stock price.” But the pilot study only covered a short period of time. “I wanted to do the study over the long-term, because with such a short time frame, you could begin to see correlations between anything—astrological signs and daily stock prices,” he jokes.

O’Connor expanded his sample to include two other consumer brands: Nike and Coca-Cola. He worked with Famecount.com to collect data on the popularity of these brands and discovered that what he found in his pilot study held true over the course of the 10 months—even accounting for general market conditions. Initially, O’Connor was unsure if online popularity (fan count) was influencing the stock prices or if the stock prices were affecting online popularity (fan count). However, by lagging fan count for 10 and 30 days, he was able to determine that it was indeed online popularity that was influencing stock prices. During this study period, as the popularity of the brands fluctuated on the Internet, Starbucks stock rose by 29 percent, Coca-Cola fell by nearly 6 percent, and Nike middled with stock growth of approximately 14 percent.

In the future, O’Connor hopes to expand his study to include a wider range of consumer brands. He believes that it’s possible for Wall Street to use fan metrics to track consumer brands, but that understanding the nature of the effect is still a challenge. “Companies are still learning the power of social media,” says O’Connor. “This is a window that offers insight into consumer behavior. Fan count and popularity can predict how well a company will do.”

O’Connor’s work is currently garnering its own “fan count” online, with increasing coverage in the media. Here are links to recent articles about his research:

The Wall Street Journal

PC Magazine

SocialMedia Observatory

Famecount.com