Marketing Spillovers of Location-Based Mobile Services

Abstract

This paper studies the increasingly prevalent check-in phenomenon on location-based service platforms. We examine the range of spatial correlation among check-ins of restaurants and bars on Foursquare, a location-based mobile service, and empirically test the promotion effect on venues’ check-ins. Our model, built on an inhomogeneous Poisson process, employs an instrumental variable approach to correct for the potential bias induced by a dummy endogenous promotion variable. The model can be used to study a broad array of problems based on spatio-temporal count data from social media. We find significant spatial correlations among neighboring venues’ check-ins. Our estimation results indicate strong spillover effects: venues’ promotions not only significantly increase their own check-ins but also benefit their neighboring venues. More interestingly, the spillover effects between restaurants and bars are asymmetric: Bars’ promotions benefit neighboring restaurants while restaurants’ promotions do not benefit neighboring bars. These results have implications for marketers who are using or considering using location-based service platforms like Foursquare, Facebook, and Yelp.

Keywords: Marketing Spillover, Location-Based, Mobile Marketing, Spatial Models

JEL Classification: M31