The Informational Value of Social Tagging Networks

Social tagging is a new way to share and categorize online content that enables users to express their thoughts, perceptions, and feelings with respect to diverse concepts. In social tagging, content is connected through user-generated keywords—“tags”—and is readily searchable through these tags. The rich associative information that social tagging provides marketers new opportunities to infer brand associative networks. This article 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 data collected from a social tagging and bookmarking website, Delicious, the authors examine social tagging data for 44 firms across 14 markets. After controlling for accounting metrics, media citations, and other user-generated content, they find 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, they find that in managing brand equity, it is more important for strong brands to enhance category dominance, whereas it is more critical for weak brands to enhance connectedness. These findings suggest a new way for practitioners to track, measure, and manage intangible brand equity; proactively improve brand performance; and influence a firm’s financial performance.