Part One: How Companies Use Social Media


Social media usage has revolutionized the way in which companies communicate with consumers. This Hartung Schroeder Practice Series is presented in five parts and provides practical guidance on the potential risks to a company attributable to the use of social media tools by the company and its employees. The Series explains:


Companies are taking advantage of social media in a variety of ways to promote brand awareness and to interact and communicate with customers. Common practices include:

  • Use of branded pages. Branded social media pages created and hosted using a third-party service, such as Facebook or Instagram, allow companies to quickly and easily establish a social media presence. The official Starbucks fan page on Facebook has over 36 million fans and counting. The Starbucks YouTube channel has over 116,000 subscribers and over 45 million upload views of videos. On Instagram, Starbucks has over 12.5 million followers. And almost 12 million people are following Starbucks on Twitter and over 280,000 on Pinterest. Although these statistics fluctuate, they are a reminder of the importance of social media in the economy.
  • Promotions and contests. Many companies are using their social media presence as a platform for promotions, by offering sweepstakes and contests within or founded on social media and user networks.
  • User-generated content (UGC). Companies frequently and increasingly create promotions centered around UGC, for example by urging consumers to submit content-rich descriptions of why they love a certain product or service.
  • Word-of-mouth marketing via blogs and influencers. Word-of-mouth marketing typically refers to endorsement messaging. Specifically, an endorsement is an advertising message that consumers are likely to believe is a reflection of the opinions and beliefs of the endorser rather than the sponsoring advertiser. Examples include providing products to third-party bloggers to create (hopefully favorable) product reviews, offering giveaways on third-party blogs, or creating a company-sponsored blog. Many companies are using amplified word-of-mouth marketing, by actively engaging in activities designed to accelerate the conversations consumers are having with brands, including the creation of Facebook applications based on a company or its product.
  • Customer service and feedback. Social media can also foster customer feedback and engagement with a brand. Companies are using social media, such as Twitter, to receive customer feedback and provide nearly instantaneous customer service, which many consumers have come to expect.
  • Responding to rumors and negative publicity. Companies can use social media to quickly respond to rumors or other negative publicity. For example, after two employees of Domino’s Pizza posted a video on YouTube in which they adulterated the chain’s food, the CEO of Domino’s Pizza responded by posting his own video, apologizing for what consumers saw and assuring them that such things were neither condoned nor practiced at the company. Both traditional media and the blogosphere applauded his open communication and willingness to engage in a conversation about the problem.
  • Disclosure of information to the public. Social media can provide companies with the ability to more effectively reach more actual or potential customers, investors and/or shareholders. Notably, the SEC now recognizes social media channels of distribution for required and other public information disclosures (either to meet regulatory obligations or in connection with individual securities transactions).
  • Employment practices. Human resources departments are increasingly using social media as a research tool to gather information for important staffing decisions, such as hiring new talent and terminating employment.


Continue to Part Two: The Four Main Risks of Social Media Faced By Companies and Employers.