Social media are gaining popularity and are increasingly used in regular operations of many companies, including start-ups, small, medium-sized, and large organizations. The purpose of this research is to explore the impact of social media and to analyze to what extent social media have impact on organizational capabilities and business performance. We develop a research model and two simple propositions based on the resource based view of the firm. We analyze the impact of six social media applications on six business capabilities and on business performance in SponsorPay, a start-up company since 2009 in the on-line game advertising industry. We use a mixed research method including qualitative analysis based on interviews and quantitative analysis based on a survey among 60 employees. We find that the use of social media enhances business capabilities and business performance. The impact is not due to one (out of six) social media tools only, but due to successfully combining the six social media tools into one effective social media ecosystem that enables coordination between internal and external business processes.