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Companies have increasingly advocated social media technologies to transform businesses and improve organizational performance. This study scrutinizes the predictive relationships between social media and firm equity value, the relative effects of social media metrics compared with conventional online behavioral metrics, and the dynamics of these relationships. The results derived from vector autoregressive models suggest that social media-based metrics (Web blogs and consumer ratings) are significant leading indicators of firm equity value. Interestingly, conventional online behavioral metrics (Google searches and Web traffic) are found to have a significant yet substantially weaker predictive relationship with firm equity value than social media metrics. We also find that social media has a faster predictive value, i.e., shorter “wear-in” time, than conventional online media. These findings are robust to a consistent set of volume-based measures (total blog posts, rating volume, total page views, and search intensity). Collectively, this study proffers new insights for senior executives with respect to firm equity valuations and the transformative power of social media.

The hotel industry continues to develop strategies for addressing consumer-generated online reviews, and particularly responding to poor reviews, which can have a damaging effect on a hotel’s reputation. To gain a greater understanding of the dynamics of poor reviews, this study analyzed 1,946 one-star reviews from ten popular online review websites, as well as 225 management responses from eighty-six Washington, D.C., hotels. A comprehensive complaint framework found that the most common complaints related to front desk staff, bathroom issues, room cleanliness, and guestroom noise issues. Complaints were also analyzed by hotel characteristics, including chain-scale segments, and reviewer characteristics, including purpose of travel and geographic location. Examining the reviews, highly rated hotels often respond to online complaints with appreciation, apologies, and explanations for what had gone wrong. Compensation adjustments are rarely mentioned by any hotel. The increasingly prominent role of social media necessitates that hotels use online reviews for market research and service recovery opportunities, regardless of whether they respond publicly.