Evaluating Promotional Activities in an Online Two-Sided Market of User-Generated Content

Abstract

We develop a modeling approach to explain demand for an online platform of user-generated content, and measure the impact of marketing activities on decisions to visit the platform and on decisions to create and buy content. The model explains individual-level choices as a function of consumer characteristics and marketing activities, allowing for interdependence of decisions within and across users. We apply our model to the Hewlett-Packard's (HP) print-on-demand service of user-created magazines, named MagCloud. We use two distinct data sets to show the applicability of our approach: an aggregate-level data set from Google Analytics and an individual-level data set from HP. Our results compare four types of marketing activities: price promotions, firm online activities, content creator referrals, and public relations efforts. We show that price promotions have strong effects on purchases, while content creator referrals and public relations have significant effects on all user decisions. We provide recommendations to the level of the firm's investments and quantify the benefits of “free” promotional activities from content creators. According to our findings, marketing actions from content creators generate about half of the business of MagCloud. This “free” marketing campaigns are likely to have a substantial presence in most online services of user-generated content.

Keywords: Demand Modeling, User-Generated Content, Two-Sided Markets

JEL Classification: C30, C15, M31