Informational Value of Social Tagging Networks

Social tagging is a new way to share and categorize online content, allowing users to express their thoughts, perceptions, and feelings with respect to diverse concepts such as brands, firms, music, politics, and more. In social tagging, content is connected through user-generated keywords known as “tags” and is readily searchable through these tags. The rich associative information provided by social tagging offers marketers new opportunities to infer brand associative networks. This paper investigates how the information contained in social tags can act as a proxy measure for brand performance and can predict the financial valuation of a firm. Using the data collected from a social tagging and bookmarking website, delicious.com, we examined social tagging data for 44 firms across 14 markets. After controlling for accounting metrics, media citations, and other user-generated content, we found that social tag-based brand management metrics capturing brand familiarity, favorability of associations, and competitive overlaps of brand associations can explain unanticipated stock returns. In addition, we found that in managing brand equity, it is more important for strong brands to enhance category dominance (that is, strongly relate to primary associations in the category) while for weak brands it is more critical to enhance connectedness (that is, become more connected to competitors’ associations). These findings suggest a new way for practitioners to track, measure, and manage intangible brand equity, proactively improve brand performance, and have an impact on a firm’s financial performance.

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