Does Chatter Matter? The Impact of User-Generated Content on Music Sales
CeDER Working Paper No. 07-06
37 Pages Posted: 31 Mar 2008
Date Written: February 2008
The Internet has enabled the era of user-generated content, threatening the hegemony of traditional content generators as the primary sources of "legitimate" information. In this study, we examine the usefulness of such content, consisting of data from blogs and social networking sites, in predicting sales in the music industry. We track changes in online chatter for a sample of 108 albums for four weeks before and after their release dates. We use linear and nonlinear regression to identify the relative significance of variables on the observation date in predicting future album unit sales two weeks ahead. Our findings are that future sales are positively correlated with (a) the volume of blog posts about an album, (b) traditional factors such as whether the album is released by a major label and reviews from mainstream sources like Rolling Stone, and (c) blog chatter above a certain "critical mass" of legitimate blog posts, in this case more than 250, before an album is released. More generally, the study provides some preliminary answers for marketing managers interested in assessing the relative importance of the burgeoning number of "Web 2.0" information metrics that are becoming available on the Internet, and shows that looking at interactions among them could provide predictive value beyond viewing them in isolation. The study also provides a framework for thinking about when user-generated content influences decision making.
Keywords: User generated content
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