Improving the Financial Stability of IT Companies through Social
Media Marketing
NATALYA SYDORENKO
Department of History of Journalism,
Taras Shevchenko National University of Kyiv,
36/1 Yurii Illenko Str., 04119, Kyiv,
UKRAINE
OLHA MITCHUK
Department of Journalism and New Media,
Borys Grinchenko Kyiv University,
13B Marshal Tymoshenko Str., 04212, Kyiv,
UKRAINE
OKSANA HOLIK
Department of Journalism and Advertising,
Kyiv National University of Trade and Economics,
19 Kyoto Str., 02156, Kyiv,
UKRAINE
LILIIA DIAHOVCHENKO, INNA HAVRYLIUK
Department of Journalism and Philology,
Sumy State University,
2, Rymskogo-Korsakova Str., 40007, Sumy,
UKRAINE
NINA MYRONETS
Department of Geography and Tourism,
Private Higher Education Establishment “Academician Stepan Demianchuk International University
of Economics and Humanities”,
4 Stepan Demianchuk Str., 33000, Rivne,
UKRAINE
WSEAS TRANSACTIONS on BUSINESS and ECONOMICS
DOI: 10.37394/23207.2022.19.146
Natalya Sydorenko, Olha Mitchuk,
Oksana Holik, Liliia Diahovchenko,
Inna Havryliuk, Nina Myronets
E-ISSN: 2224-2899
1621
Volume 19, 2022
Abstract: In the context of the COVID19 pandemic, many companies face the problem of declining financial
stability. IT companies are unique in this aspect, because their field of activity is entirely based on digital
platforms and does not require direct contact with customers. Besides, social media marketing is becoming
increasingly popular. The study of the impact of social media marketing on improving the financial stability of
IT companies becomes urgent under the conditions of fierce competition, when it is necessary to ensure high
rates of financial stability. The aim of the study is to determine the impact of social media marketing on
improving the financial stability of IT companies. The data sample for this study includes the 20 largest IT
outsourcing companies in Ukraine in 2020. The study was conducted using linear regression models, which
were tested by the least squares method. The impact of social media marketing was introduced into the model
through the use of a dummy variable. The results of the study showed that social media marketing has a positive
statistically significant impact on Profitability of Cash, Profitability of Cash Outflow, Profitability of Cash
Inflow, Profitability of Net Cash Flow. The obtained results can be used to assess the impact of social media
marketing on cash flow indicators and financial stability of IT companies. The study opens up new areas for
further research, in particular the impact of the established brand of the IT company in social media on its
financial stability.
Key-Words: - Cash Flow; Financial Stability; IT Companies; Marketing Effect; Social Media Marketing
(SMM).
Received: September 3, 2019. Revised: August 16, 2022. Accepted: September 7, 2022. Published: September 20, 2022.
1 Introduction
The strengthening of the competitive environment
necessitates the search for either new niches in the
market or expanding market share. Social media
marketing is of particular importance in this process,
given the general digitalization against the
background of pandemic restrictions [1]. On the one
hand, social media marketing can provide a flow of
new customers. On the other hand, companies need
to ensure compliance with acceptable indicators of
financial stability, as they are an indicator of their
economic condition [2]. In view of the above, the
impact of social media marketing on improving the
financial stability of companies requires studying.
Representation of companies in social media can be
considered in two aspects: both to establish contact
with customers and gain their loyalty to the
company or brand, and to directly advertise their
services.
Examining the impact of SMM on the activities
of small businesses, the authors [3] note that the use
of social media has a positive effect on the activities
of small and medium-sized businesses. It is
established that the additional costs of marketing
campaigns in the future are offset by better
performance. This trend is typical for both small and
medium-sized businesses. Another group of authors
[4] found that social media tools allow companies to
increase the number of consumers and customers,
increase customer satisfaction, and provide the
necessary information for further promotion on the
market. However, it is necessary to integrate social
media into the company’s development strategy and
allocate appropriate resources for this in order to
have an effect on financial stability. The one-time
effect of the company’s presentation on social
media is not enough to improve financial stability
[5].
In a study of the importance of social media
marketing during the COVID19 pandemic, the
authors [6] conclude that it has a positive role. In
particular, the transition of companies to the digital
environment, the use of SMM and e-business
technologies significantly improves the financial
situation during the pandemic. However, the authors
also note that the transition to a digital environment
alone cannot offset by the positive effect all the
losses of companies caused by the reduction of
aggregate demand.
Investigating the factors that affect the financial
stability of small and medium enterprises, [7]
distinguish economic and financial indicators.
However, representation on social networks and
advertising on such networks were not singled out
by the authors as factors of financial stability.
It is suggested that the reason for this is that in
the pre-pandemic period, the importance of these
factors was underestimated, as companies conducted
marketing campaigns mostly offline in direct
contact with the consumer. The situation has
changed dramatically, which makes it necessary and
urgent to study the impact of social media marketing
on the financial stability of companies [8].
Examining the impact of social media marketing
on the relevance of the brand, which affects the
demand for the company’s products and its financial
stability, the authors [9] argue that such advertising
is very important. SMM allows maintaining quality
communication with consumers, even in the
conditions of social distancing. This ensures stable
sales of products, and therefore has a positive effect
on the company’s financial stability. Besides, in the
face of increased competition, social media
marketing allows maintaining brand awareness,
which is the key to financial stability in the long
run.
Exploring the role of social media in business
acquisitions, [10] found an important role for the
media in this process. In particular, it was found that
the previous announcement of the purchase and the
cost of the contract on social networks reduces the
negative reaction in the media after the company’s
acquisition. Such conclusions prove the importance
of the company’s communication in social media.
Therefore, it is important to investigate other effects
of companies’ presence in social media, including
financial stability.
In another study of the impact of marketing on
social media, the authors [11] examine the impact
on the company’s position. The authors consider the
position of the company through the prism of such
indicators as time spent on the website, re-visits,
likes on social networks, subscriptions. The authors
consider these indicators as factors of long-term
customer commitment that ensure the company’s
financial stability. It is established that a regular
presence on social media provides the company
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Natalya Sydorenko, Olha Mitchuk,
Oksana Holik, Liliia Diahovchenko,
Inna Havryliuk, Nina Myronets
E-ISSN: 2224-2899
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with a long-term stable consumer commitment and
has a positive effect on sales.
Another group of authors [12] also studied the
strategic role of social media for doing business.
They found that SMMs are mostly used by small
and medium-sized companies which have managers
with higher education. The use of social media
marketing has resulted in an increase in the
profitability of such companies. It was also found
that large companies pay little attention to social
media and are inactive in their advertising activities.
In a study of the role of media marketing for
banks, the authors [13] note that the main obstacle
to the implementation of marketing campaigns on
social media is the lack of demand from consumers.
This result of the study can be explained by the fact
that banking services are risky for users, so the issue
of trust is especially relevant. Clients of banking
institutions prefer classic communication channels.
Banks are actively increasing their presence on
social media amid the pandemic and the growing
level of security of electronic communication
channels [14].
A similar study [15] on the example of
developing economies showed that small banks had
a positive effect from social media marketing. In
particular, they have the effect of increasing interest
income due to an increase in loans. It was social
media marketing that helped increase the loan
portfolio. These results confirm the importance of
social media marketing and update further research
on this topic.
The literature review has shown that the role of
advertising, marketing and social media is a topical
issue for research, but the impact of social media
marketing on financial sustainability is completely
ignored. In a pandemic and rapid transformation of
the external economic environment, financial
stability is one of the main priorities of strategic
management of companies. With this in mind, the
aim of the study is to determine the impact of social
media marketing on the financial stability of IT
companies. Achieving the aim involves the
following objectives: determine the indicators of
financial stability before social media marketing and
after it and to determine the impact of advertising on
changes in the values of financial stability on the
basis of the data obtained.
The second chapter of the study will describe the
research methodology, the third chapter presents the
results of the research, the fourth chapter presents
the comparison of the obtained results with the
results of other studies, and the fifth chapter
contains the conclusions of the conducted research.
2 Methodology
The financial aspect of formulating an effective
strategy in terms of amalgamation of territorial
communities consists of assessing certain indicators
(factors) of the external and internal environment
[4]. The importance of factors in this case is to
analyse information on external and internal
environments, directing them to strategic thinking,
focused on the development and growth of ATC
welfare, the availability of open innovation. Open
innovations are those that outline the effectiveness
of activities while minimizing costs. Open
innovations allow creating progress using new and
affordable tools [5].
Innovation is the basis of research and socio-
economic development, and since the 2000’s, there
has been growth to stimulate new opportunities for
growth through innovation strategies [6]. Innovation
is not, however, widely used in many regions, but
only in terms of entrepreneurial innovation [7].
Adaptation of ATC management to
environmental conditions requires effective current
methods and tools of support and protection, as the
development of an effective model of innovative
financial management strategy. Research in this area
has almost not been conducted, so we should expect
further development of the discussion around the
creation of the importance of a particular factor in
the internal or external environment [8]. In fact,
such interaction should be achieved in the
implementation of an innovative financial
management strategy in terms of amalgamated
territorial communities (ATC), where community
and the state are stakeholders.
Let’s note that we are talking about the fact that
local self-government bodies independently
develop, approve and implement the relevant local
budgets in accordance with applicable laws, and
interference of public authorities in these processes
is not allowed. It is especially important that the
state financially supports local self-government,
participates in the formation of local budget
revenues, monitors legal, appropriate, economical,
efficient spending and proper accounting, so, there
must be a sufficient revenue base to provide services
at the level of minimum social needs [9].
The development of an effective strategy for
ATC is to optimize the use of the potential of the
region (territory) by applying development policies
to individual socio-economic conditions, taking into
account indicators of external and internal
environments [10]. The implementation of the
innovation strategy requires consideration of the
subsidiarity principle, which is based on the
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Natalya Sydorenko, Olha Mitchuk,
Oksana Holik, Liliia Diahovchenko,
Inna Havryliuk, Nina Myronets
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intervention of public authorities within its
competences [11].
2.1 Research Design
At the first — preparatory — stage, we conducted a
study of relevant scientific articles that address the
impact of social media marketing on the companies’
economic performance. Based on a critical
assessment of the results of previous research, we
formulated the aim and objectives of our study. The
next component of the preparatory stage is the
development of research design and collection of
source data for further processing and use.
The second stage of the study involves the
construction and testing of regression in accordance
with the built model, as well as the evaluation and
interpretation of the results. The final stage of the
study involves specifying the methodological and
implementation limitations of the study and drawing
the conclusions.
2.2 Objectives
The aim of the study involves solving the following
objective:
- determine the indicators of financial stability of
IT companies in the period preceding the social
media marketing;
- assess the degree of influence of social media
marketing on the financial stability of IT companies.
In particular, the study focuses on determining the
direct impact of marketing campaigns of IT
companies on their financial indicators.
2.3 Sample
The 20 largest IT companies in Ukraine in 2020
were selected for the sample [16]. Outsourced IT
companies were included in the sample, as the
companies with such specialization are the most
registered in Ukraine, and their services are focused
on a wide range of consumers. Besides, outsourcing
companies actively use social media marketing, as
their market niche is one of the most competitive,
and consumers of their services are a wide audience,
which includes both the B2B and B2C business
format. The list of companies included in the sample
is given in Table 1.
Table 1. IT companies that make up a sample of research
Name
Revenue for 2020, UAH
million
Net income for 2020, UAH
million
Genesis
18,648.2
11,323.9
Epam
10,449.5
943.5
GlobalLogic
5,502.5
277.7
Ciklum
3,420.5
49.6
Infopulse
2,374.8
420.7
SoftServe
2,189.2
215.5
Intellias
1,892.3
78.8
Lohika
1,560.3
98.5
EVO
1,117.8
25.1
Sigma Software
1,068.6
57.3
Netcracker
963.7
54.4
Ubisoft
773.1
59.3
Playrix
532.2
29.3
NIX
525.8
21.4
Ajax Systems
478.5
10.5
ELEKS
385.3
47.6
Luxoft
180.6
3.8
N-iX
139.8
7.9
EVOPLAY
4.7
3.7
DataArt
3.4
0.2
In this study, we build a model that reflects the
impact of social media marketing on financial
stability. Because the activities of IT companies are
specific in view of the fact that such companies
have tangible assets, mainly computer equipment
and no inventories and other tangible assets.
Besides, the product created by IT companies
has an intangible form. With this in mind, we chose
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a list of indicators based on cash flow when
assessing financial stability. The study period
includes two stages. The first stage covers the
period of 2016-2018 and will be the reference
period for comparison. The second stage covers the
pandemic period of 2019-2021, during which the
company used social media marketing and
increased its presence on social media. Thus, the
factor of social media marketing will be presented
in the model as a fictitious variable and will have a
value of 0, that is no impact for 2016-2018, and for
2019-2021 will have a value of 1, that is the impact.
In this way, we will be able to establish the effect of
social media marketing on financial stability.
2.4 Methods
The main research method is the linear regression
calculated by the least squares method. A dummy
variable will be introduced to indicate the effect of
social media marketing. For the initial data,
financial stability indicators are measured in
hryvnias (Profitability of Cash, Profitability of Cash
Outflow, Profitability of Cash Inflow, Profitability
of Net Cash Flow). Since the values of all variables
and the resulting indicator in the next period depend
on their value in the previous period, all data for
testing the model are considered as time series
(Time Series Data).
2.5 Instruments
The table with the initial data for the study was
made in Microsoft Excel. Gretl software was used
for regression calculations.
3 Results
We consider the financial stability of IT companies
through the value of cash flow assessment
indicators. We consider the coefficient of financial
stability as the arithmetic mean of the sum of
Profitability of Cash, Profitability of Cash Outflow,
Profitability of Cash Inflow, Profitability of Net
Cash Flow. Figure 1 shows the dynamics of
Financial Stability of IT companies for 2016-2021.
The data of Figure 1 show a steady upward trend
in the values of financial stability of IT companies.
The reliability of this trend is 99%. In general, such
dynamics of the values of financial stability is
typical both in the period before social media
marketing and after it. For a more detailed analysis,
we consider the dynamics of the values of the
components of the coefficient of financial stability
(Figures 1-5).
Fig. 1: The dynamics of Financial Stability.
Source: Authors
Fig. 2: The dynamics of Profitability of Cash.
Source: Authors
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Fig. 3: The dynamics of Profitability of Cash Outflow.
Source: Authors
Fig. 4: The dynamics of Profitability of Cash Inflow.
Source: Authors
Fig. 5: The dynamics of Profitability of Net Cash Flow.
Source: Authors
The data of Figure 3 show that in general the
dynamics of return on cash tends to increase, but
there are deviations from this trend. In particular, a
significant deviation is typical for the whole of
2018 and Q1-Q2 2020. In general, after the start of
the marketing campaign on social networks, the
absolute value of this indicator has increased, which
is in line with the trend. However, the reliability of
the trend line is 69%, which indicates the
heterogeneity of the dynamics of growth in
Profitability of Cash. The data of Figure 3 show
that the dynamics of the value of Profitability of
Cash Outflow has a more pronounced upward trend
than the trend of the dynamics of Profitability of
Cash. In general, this indicates a high efficiency of
spending money by an IT company.
The reliability of the trend is 93%, which is
quite a high figure. Besides, we see a rapid increase
in the values of this indicator during the period of
social media marketing campaigns in the first three
SMM y = 0,0032x + 0,0615
R² = 0,938
0
0,02
0,04
0,06
0,08
0,1
0,12
0,14
0,16
SMM y = 0,0041x + 0,0685
R² = 0,9589
0
0,02
0,04
0,06
0,08
0,1
0,12
0,14
0,16
0,18
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quarters after their launch. Starting from 2020, the
dynamics of growth of Profitability of Cash
Outflow decreased, although it remained stable at
the level of positive values. The dynamics of
Profitability of Cash Inflow shows an even more
rapid growth throughout the analysed period
(Figure 4). In this case, the reliability of the trend is
95%, and we observe a constant upward trend in the
values of Profitability of Cash Inflow. In contrast to
the decrease in Profitability of Cash Outflow in
2018, such an effect is absent for Profitability of
Cash Inflow. We assume that this may be due to
additional costs in the IT company in 2018. As a
result, it was decided that it is necessary to improve
the financial performance through social media
marketing.
If we analyse Profitability of Net Cash Flow, we
see that the dynamics of the values of this indicator
is also upward, which generally positively describes
the financial stability of companies. However, there
are deviations from the trend value of this indicator.
In particular, deviations in the direction of lagging
behind the trend in 2017-2018 and the first half of
2020 dominate. However, if we compare the period
before and during the social media marketing
campaigns, the lag behind the trend in terms of
marketing campaigns is much smaller over time.
Besides, there is an excess of trend indicators
immediately after this period. We assume that this
effect may be due to the social media marketing,
which provided an increase in the number of orders
for IT companies. In order to test this assumption,
we will build and test appropriate models. In order
to determine whether advertising on social media
has had an impact on the company’s financial
stability, we consider financial stability as a
function of cash flow indicators:
 󰇛    󰇜
(1)
or in the form of linear regression
    
 
(2)
where:
FS –Financial Stability Index;
PC –Profitability of Cash;
PCO –Profitability of Cash Outflow;
PCI – Profitability of Cash Inflow;
PNCF –Profitability of Net Cash Flow.
SMM – social media marketing (starting from 2019)
The results of regression are shown in Table 2.
Table 2. The results of linear regression of the dependence of Financial Stability Index
Coefficient
Std. Error
t-ratio
p-value
const
0.000832
0.0007137
1.166
0.2597
PC
0.248089
0.0145889
17.01
<0.0001
***
PCO
0.230120
0.0136425
16.87
<0.0001
***
PCI
0.251783
0.0066858
37.66
<0.0001
***
PNCF
0.298234
0.0259606
11.49
<0.0001
***
SMM
8.69736e-05
0.0003390
0.2565
0.8006
Mean dependent var
0.076522
S.D. dependent var
0.016076
Sum squared resid
1.15e-06
S.E. of regression
0.000260
R-squared
0.999797
Adjusted R-squared
0.999738
F(5, 17)
16776.64
P-value(F)
9.25e-31
Log-likelihood
160.6732
Akaike criterion
−309.3464
Schwarz criterion
−302.5334
Hannan-Quinn
−307.6329
rho
−0.271483
Durbin-Watson
2.499944
Note: Model 1: OLS, using observations2016:1-2021:3 (T = 23); Dependent variable: FS
The results of regression testing 1 indicate the
statistical significance of all regressors of the
Financial Stability Index of the IT company, except
for Social Media Marketing. In general, this result
is expected because the Financial Stability Index is
calculated on the basis of these regressors and
includes them. However, it is interesting to note
that social media marketing is not a statistically
significant regression of financial stability. We
assume that this result may be due to the fact that
direct social media marketing should be converted
into an increased cash flow due to increased
revenue. At the same time, the Financial Stability
Index is calculated on the basis of indicators of
Profitability of Cash Flow, as a result of which the
effect of social media marketing on the resulting
indicator becomes blurred. For a more detailed
analysis of the impact of social media marketing,
we consider models where the resulting indicators
are the regressors of financial stability.
To determine the impact of social media
marketing on the indicators of cash flow, we build
and test appropriate models that are functions of the
dependence of the resulting indicator on social
media marketing:
󰇛   󰇜 󰇛󰇜
(3)
Or in the form of linear regression
PC=β_0 const+β_1 SMM+ε_t
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PCO=β_0 const+β_1 SMM+ε_t
PCI=β_0 const+β_1 SMM+ε_t
PNCF=β_0 const+β_1 SMM+ε_t (4)
where:
PC –Profitability of Cash
PCO –Profitability of Cash Outflow;
PCI –Profitability of Cash Inflow;
PNCF –Profitability of Net Cash Flow.
SMM – social media marketing (starting from 2019)
The results of regressions are shown in Tables 3-
6.
Table 3. The results of the linear regression of the dependence of Profitability of Cash on social media
marketing
Coefficient
Std. Error
t-ratio
p-value
const
0.0572500
0.0016460
34.78
<0.0001
***
SMM
0.0093863
0.0023802
3.944
0.0007
***
Mean dependent
var
0.061739
S.D. dependent
var
0.007350
Sum squared resid
0.000683
S.E. of regression
0.005702
R-squared
0.425467
Adjusted R-
squared
0.398108
F(1, 21)
15.55140
P-value(F)
0.000744
Log-likelihood
87.24972
Akaike criterion
−170.4994
Schwarz criterion
−168.2285
Hannan-Quinn
−169.9283
rho
0.795217
Durbin-Watson
0.505761
Note: Model 2: OLS, using observations 2016:1-2021:3 (T = 23); Dependent variable: PC
Table 4. Results of linear regression of dependence of Profitability of Cash Outflow on social media marketing
Coefficient
Std. Error
t-ratio
p-value
const
0.0805833
0.0024633
32.71
<0.0001
***
SMM
0.0411439
0.0035619
11.55
<0.0001
***
Mean dependent
var
0.100261
S.D.
dependent var
0.022608
Sum squared
resid
0.001529
S.E. of
regression
0.008533
R-squared
0.864013
Adjusted R-
squared
0.857537
F(1, 21)
133.4264
P-value(F)
1.47e-10
Log-likelihood
77.97798
Akaike
criterion
−151.9560
Schwarz
criterion
−149.6850
Hannan-Quinn
−151.3848
rho
0.480303
Durbin-
Watson
0.879567
Note: Model 3: OLS, using observations 2016:1-2021:3 (T = 23); Dependent variable: PCO
Table 5. The results of the linear regression of the dependence of Profitability of Cash Inflow on social media
marketing
Coefficient
Std. Error
t-ratio
p-value
const
0.0955000
0.0045859
20.82
<0.0001
***
SMM
0.0469545
0.0066312
7.081
<0.0001
***
Mean dependent
var
0.117957
S.D.
dependent var
0.028566
Sum squared
resid
0.005300
S.E. of
regression
0.015886
R-squared
0.704799
Adjusted R-
squared
0.690742
F(1, 21)
50.13802
P-value(F)
5.50e-07
Log-likelihood
63.68375
Akaike
criterion
−123.3675
Schwarz
criterion
−121.0965
Hannan-Quinn
−122.7963
rho
0.707812
Durbin-
Watson
0.479836
Note: Model 4: OLS, using observations 2016:1-2021:3 (T = 23); Dependent variable: PCI
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DOI: 10.37394/23207.2022.19.146
Natalya Sydorenko, Olha Mitchuk,
Oksana Holik, Liliia Diahovchenko,
Inna Havryliuk, Nina Myronets
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Table 6. The results of the linear regression of the dependence of Profitability of Net Cash Flow on social media
marketing
Coefficient
Std. Error
t-ratio
p-value
const
0.0185833
0.0011668
15.93
<0.0001
***
SMM
0.0141439
0.0016872
8.383
<0.0001
***
Mean dependent
var
0.025348
S.D.
dependent var
0.008233
Sum squared resid
0.000343
S.E. of
regression
0.004042
R-squared
0.769921
Adjusted R-
squared
0.758964
F(1, 21)
70.27282
P-value(F)
3.86e-08
Log-likelihood
95.16377
Akaike
criterion
−186.3275
Schwarz criterion
−184.0565
Hannan-Quinn
−185.7564
rho
0.674402
Durbin-
Watson
0.671747
Note: Model 5: OLS, using observations 2016:1-2021:3 (T = 23); Dependent variable: PNCF
The data of Table 3 indicate that social media
marketing is a statistically significant regressor of
Profitability of Cash. Statistical significance is
confirmed by p-value 0.0007. The reliability of this
model is 40%, which is due to the fact that
Profitability of Cash is influenced by other factors
that are not the subject of our study. Social media
marketing is also a statistically significant regressor
of Profitability of Cash Outflow (Table 4). This is
confirmed by a p-value less than 0.0001 at a 95%
confidence interval and a model reliability of 86%.
In this case, the reliability of the model of impact of
social media marketing on Profitability of Cash
Outflow is higher due to the fact that the cost of
advertising was converted into an increased revenue
of the IT company because of the increased number
of orders. The same applies to the impact of
advertising on social media on Profitability of Cash
Inflow (Table 5). Advertising on social media is a
statistically significant regressor of Profitability of
Cash Inflow, which is confirmed by a p-value less
than 0.0001 and the model reliability of 69%.
Analysis of the impact of social media marketing
on Profitability of Net Cash Flow also confirms the
statistical significance of this regressor (Table 6).
Social media marketing is a statistically significant
regressor of profitability of the company’s net cash
flow (a p-value less than 0.0001, and the model
reliability of 76%). Besides, the data obtained allow
saying that social media marketing has a positive
effect on the value of Profitability of Net cash
Flow:
- increased Profitability of Cash by 0.009 (p-value =
0.0007; Adjusted R-squared = 0.40);
- increased Profitability of Cash Outflow by
0.041 (p-value <0.0001; Adjusted R-squared =
0.86);
- increased Profitability of Cash Inflow by 0.047
(p-value <0.0001; Adjusted R-squared = 0.69);
- increased Profitability of Net Cash Flow by
0.014 (p-value <0.0001; Adjusted R-squared =
0.76).
The obtained data allow us to conclude that
social media marketing has a statistically significant
positive impact on Profitability of Net Cash Flow of
the IT company. In particular, this also proves the
effectiveness of marketing in terms of increasing
the volume and efficiency of cash flow and
improving the company’s liquidity.
3.1 Limitations and Implications for the
Research
This study has methodological and implementation
limitations. A methodological limitation is that 20
IT companies are the subject of the study. If the
research is conducted on a larger number of
companies, the results may differ from those that
we obtained. The implementation limitation is that
depending on the specifics of the IT company and
the quality of advertising on social media, the
impact of advertising on Profitability of Cash Flow
may vary. The surveyed IT companies are
outsourcing companies and provide a wide range of
services, so social media marketing was designed
for a large number of target audiences, both
individuals and businesses. If another company is
engaged in more narrowly specialized activities,
social media marketing may not give the results
forecasted by our models.
4 Discussions
The results show the positive impact of social
media marketing of the IT company in the
Ukrainian business environment. It is interesting to
compare this effect of social media marketing with
companies from other countries, because such a
positive effect can be caused by the peculiarities of
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Natalya Sydorenko, Olha Mitchuk,
Oksana Holik, Liliia Diahovchenko,
Inna Havryliuk, Nina Myronets
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the internal business environment of Ukraine and
the role of social media in society and business. In
order to get an answer to this question, we will
compare our results with the results of other studies.
Let us note that we will use not only IT companies
for comparison, because all companies have access
to social media marketing at the same level, so the
effect of social media marketing for them is
comparable. In particular, this is noted in a number
of studies [17-20].
Researchers in [21], examining whether social
media marketing can significantly increase profits,
concluded that such an effect is not observed for
shareholders. However, effective advertising on
social media can increase the company’s profits.
Rapid changes in stock prices can be affected by
random events. The results of our study show that
as a result of social media marketing campaigns, the
financial stability of the company’s IT is
improving. The results of our study also show that
advertising on social media increases the profits of
IT companies.
In a study of the impact of social media
marketing on the performance of microfinance
institutions, the team of authors [22] argues that
there is a strong positive correlation. Our study also
demonstrates a statistically significant correlation
between social media marketing campaigns and
different Profitability of Net Cash Flow rates of IT
companies.
Examining the advantages and disadvantages of
social media marketing, the authors [23] note that
such marketing is publicly available. So, it can be
used by different companies. Social media
marketing can be both paid and free, but still allow
getting a positive effect for the company. Our study
shows that paid advertising can significantly
improve the financial performance of an IT
company, which in turn translates into improved
financial stability through a positive impact on
Profitability of Cash Outflow and Inflow.
Another study [24] notes that the use of media
marketing can significantly improve the
performance of small and medium-sized businesses.
Even if there are initial costs for content creation
and publication, there is an effect of exceeding the
benefits over the initial investment for small and
medium-sized businesses.
Besides, for small and medium-sized businesses
that do not have large resources for large-scale
advertising campaigns, social media marketing is an
affordable and effective way to increase the number
of its customers [25]. Such conclusions are
completely correlated with the results of our study.
An IT company that invests in social media
marketing has a positive effect on Profitability of
Net Cash Flow.
In a study of social media and value of the
company’s shares [26], the authors found that
companies are increasingly using the media to
improve their performance. It is established that the
company’s presence on social networks affects the
value of the company’s shares. It follows that social
media marketing affects not only the indicators of
financial stability, as evidenced by the results of our
study, but also the value of the company’s shares.
We assume that if Ukrainian IT companies were
public companies whose shares are traded on stock
exchanges, the growth of financial stability would
also increase the value of its shares [27].
In a study of the impact of social media on
economic growth [28], the author notes that
companies’ and users’ access to online networks
can improve communication and provide a positive
impact on economic growth. This effect can be
explained by a reduction in transaction costs. The
same effect applies to individual companies, which
reduced the costs of finding customers through
advertising on social media. Our results confirm
this.
A study of the impact of social media on the
companies’ performance [29] showed a strong
positive impact of the company’s use of social
media on the results of its activities. In particular,
such a positive effect is achieved through
innovation and brand building, resulting in growing
demand for the company’s products. The results of
this and our study open a new section of the impact
of social media on the company’s financial
stability, in particular the impact of the existing
company’s brand in social media on its financial
stability.
A similar study [30] found that the company’s
sales increase when social media is used not so
much for direct advertising as for communications
with customers. In this context, it should be noted
that the presence of companies on social media
involves not only direct advertising publications,
but also publications aimed at building user loyalty
to the company and its products. Similar findings
were obtained in another studies [30, 31] which
showed that the reactions of users of social
networks in the form of likes and subscriptions
have a positive effect on the company’s
performance. This confirms the fact that loyalty to
the company is converted into improving its
performance.
A study by [32] showed that there is a 51%
elasticity between sales and marketing campaigns.
Besides, content also has a significant impact on
increasing sales. This confirms the very idea of
social media marketing, which implies a connection
between the information that the company conveys
to the customer and the customer’s decision to buy
a product or service.
A comparison of the results with research on the
example of foreign companies showed that
advertising on social media undoubtedly has a
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Natalya Sydorenko, Olha Mitchuk,
Oksana Holik, Liliia Diahovchenko,
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positive impact on companies. However, the nature
of this impact is different and can be manifested
both in increasing market capitalization and in
increasing the profitability of companies. In
general, we can say that the positive impact of
social media advertising on the performance of
companies is typical for both Ukrainian and foreign
companies.
5 Conclusion
Social media marketing is becoming an
increasingly popular means of increasing customer
base and sales. However, in times of pandemic
constraints, when markets are shrinking, the issue
of financial stability becomes relevant. In this
context, the question of how much social media
marketing, which is becoming increasingly popular,
can improve financial performance is relevant. The
activities of IT companies are specific in the sense
that they have virtually no material base for their
activities. Therefore, the most suitable indicators
for assessing their financial stability are indicators
based on cash flows.
The study showed that social media marketing
has a positive statistically significant effect on such
indicators as Profitability of Cash, Profitability of
Cash Outflow, Profitability of Cash Inflow,
Profitability of Net Cash Flow. These consolidated
indicators represent the Financial Stability rate
based on cash flow. Comparison of the results of
the study with the results of other studies indicate
that foreign companies are also characterized by the
positive impact of social media marketing on the
economic performance of companies.
The obtained results can be used to assess the
impact of social media marketing on cash flow and
financial stability of IT companies. The conducted
research and the obtained results can be used to
justify the need for marketing campaigns in the
field of IT. The obtained results confirm that
marketing campaigns positively influence the
economic performance of IT companies. The
methodological limitation of the study is that the
object of the study is only one IT company. The
research conducted on a larger number of
companies may give different results. The
implementation limitation is that depending on the
specifics of the activities of IT companies and the
quality of social media marketing, the impact of
advertising on the profitability of cash flow may
differ. The studied IT company provides a wide
range of services, so social media marketing was
designed for a large number of target audiences,
both individuals and businesses. If another
company is more specialized, social media
marketing may not give the results forecasted by
our models.
The obtained results open perspectives for future
research, particularly the impact of marketing
campaigns on increasing the number of clients of IT
companies and the number of implemented
projects.
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