Social media is often viewed as a tool that allows people to interact with family, friends, and a wider social circle by sharing information, images, and experiences in real time. Massive reductions in the cost of information and communication technology and the proliferation of internet access have led social media to become an everyday tool for many individuals and organisations across the globe.
In this report, we set out to gain a deeper understanding of how European businesses, in particular, use digital tools and social media to empower businesses throughout their lifecycle, from start-up to establishment and with every customer relationship. There is significant evidence that a broad range of digital tools can help businesses in all industries throughout Europe by reducing the costs of marketing and sales, reducing the barriers to entrepreneurship, expanding the reach of export markets, and facilitating innovation within businesses and throughout industries.
To explore these effects, we conducted a survey focusing on the role of social media, using Facebook apps and technologies as an example. Representatives from 7,720 businesses in 15 countries across the EU responded. The survey results suggest that digital technologies, like Facebook apps and technologies, facilitate business growth, trade, and innovation.
Business growth. Our survey supports the general finding from the literature that digital tools can be especially helpful for small companies by breaking down barriers to growth. The surveyed SMEs using Facebook apps and technologies report the following:
Digital tools allow suppliers and customers to interact at a lower cost and at a higher frequency than other means of communication. According to the survey in this study, 54 per cent of companies using Facebook apps and technologies use them to communicate with customers. Furthermore, digital technology such as online advertising allows companies to specifically target their core customers, limiting the display of ads to those who are most likely to respond positively. Our survey finds that 69% of SMEs found lower costs of marketing to be the main benefit of using digital tools and social media for business purposes.
Trade. We find that 7 in 10 businesses using Facebook apps and technologies are exporting to other countries, compared to the 5 in 10 of companies not using Facebook apps and technologies. The same group of companies using Facebook apps and technologies also report that 19 per cent of their revenue stems from international sales, compared to 14 per cent for non-users. Of those surveyed, 6 in 10 businesses using Facebook apps and technologies report them as helpful when entering new markets.
Surveyed businesses across 15 EU markets say that using Facebook apps and technologies helped them generate international sales corresponding to an estimated EUR 98 billion in exports last year. When splitting export attributions, it is found that Facebook apps and technologies are useful in establishing and growing exports to countries inside and outside the European Union. Surveyed businesses credit EUR 58 billion worth of exports within the EU and EUR 40 billion worth of exports outside the EU to the use of Facebook apps and technologies.
Innovation. Digital tools allow suppliers and customers to interact at a lower cost and at a higher frequency than other means of communication. According to the survey in this study, 54 per cent of companies using Facebook apps and technologies use them to communicate with customers, and 63 per cent say Facebook apps and technologies are important in their efforts to improve customer service. The enhanced means of communication also provides a strong loop of information to improve a supplier’s ability to develop, align, and market products that meet consumer needs.
Improving the quality of existing products and coming up with new designs are essential for businesses to remain competitive. In our survey, businesses using Facebook apps and technologies report that the apps’ embedded feedback options were helpful in this regard. 4 in 10 companies state they use this feedback to improve their product offering, while 3 in 10 companies use it to improve how their business is organised.
Wider economic benefits. The surveyed companies using Facebook apps and technologies attribute a large share of their business activity to the use of the apps, as reflected in attributed output, jobs, and exports. Surveyed businesses across 15 EU markets say that using Facebook apps and technologies helped them generate sales corresponding to an estimated EUR 208 billion in economic activity last year. When we take a deeper look into that, using standard economic modelling techniques, this translates into an estimated 3.1 million jobs.
Our analysis focuses on economic benefits for producers; the additional benefits realised for consumers are not within the scope of this report.
The study is commissioned by the Facebook Company.
For further information and media enquiries regarding the findings and methodology of this report, please contact Dr Bruno Basalisco, available at bb@copenhageneconomics.com. For all other media enquiries regarding the Facebook Company, please contact Mihiri Bonney available at bonney@fb.com
A one-page summary about Copenhagen Economics is available here
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