The Effect of Social Media as a Marketing Channel on Advertising Costs

The aim of this paper is to examine the relationship between social media activities (e.g., adopting social media as a marketing channel：posting, editing page information, commenting, liking, and sharing) and corporate operating costs, particularly advertising costs, using actual market data. And we study the effect of the debt ratio on the relation between adopting social media and advertising cost. In total, 565 firms listed in KOSPI are included in the empirical study. Multiple regression method is conducted. The results suggest that company－driven social media activity (posting, updating text) is related to higher advertising expenses, while customerdriven social media activity (liking, commenting) is not. Also, the positive association between adopting social media and advertising cost is weakened, as the debt ratio of the corporation is higher. To the best of our knowledge, this empirical study is the first to empirically reveal the numerical relationship between social media activities and advertising costs using actual market data.