It seems like every Indie in the world leverages social media and so do the big publishers, does anyone know if there's been a any kind of study or even claims about how social media use has affected the bottom line/sales (e.g. advertising budget could be reduced by 70% to get the same sales, that kind of thing)? I'm terribly curious about this.

Well, apart from paying someone to maintain it, it's very, very cheap advertising. Definitely a more cost effective means of reaching a large audience than most mainstream means of advertising you could name.

I don't know if you could expect to find any reliable information on sales increases though as for most there would be no click-through information.

No, social networking and media don't do anything to enhance game sales, it has nothing to do with the way games perform in the market. Incidentally, I would heartily recommend THE SIMS MEDIEVAL, because I get a fat check every time I do.

I'm not sure about a formal study. As for claims, however, you might want to persue some recent quarterly or annual reports from the better known public gaming compaines. It's possible that they have a discussion on the merits of social media advertising in the management comments section(s) of these reports.

I dont see how. I find one update on twitter more than enough as it is. I was amused to see Football Manager 2011 has facebook and twitter integration. Who seriously wants to know I beat some team in the Johnstown Paint Trophy?

Who want's to know what achievements in XLive / Steam / WoW you did? Who cares about your gamerscore? Nobody except yourself. Yet still they captivate / sell...

Social media is the current "big thing" that "might take off" like WoW did for MMOs - at least that's how's been seen from the industry point of view it seems.
I also don't see how it enhances a game and therefor it's sales. But it also might take that road of adding redundant features, people go for (like achievements).

As far as advertising / sales go.... it's an industry thing. They STILL fail to see what originality (Minecraft) can achieve.

Of course it works. One of the biggest factors in keeping a friendship healthy is sharing interests. Actually scrub that, most gamers don't have friends so how could it work?

In terms of integration with social media; no, not really. Why would it? After all, any "facebook integration" is just a fiddly way of telling your friends you suck at Starcraft 2, or conversely telling them just how much you really are playing Starcraft 2. It's not a selling point, and I doubt a high percentage of any games population are using it. There's never any real mention of it that I've seen on popular Facebook-supported online titles.

In terms of social media being a good jungle telegraph, yes. But news will find a way to get around one way or the other. It's just a conduit.