Does Online Word-of-Mouth Increase Demand? (and How?) Evidence from a Natural Experiment

58 Pages Posted: 20 Nov 2015 Last revised: 28 Feb 2018

See all articles by Stephan Seiler

Stephan Seiler

Imperial College Business School; Centre for Economic Policy Research

Song Yao

Washington University in St. Louis - John M. Olin Business School

Wenbo Wang

Hong Kong University of Science & Technology (HKUST) - Department of Marketing

Date Written: March 23, 2017

Abstract

We leverage a temporary block of the Chinese microblogging platform Sina Weibo due to political events, to estimate the causal effect of online word-of-mouth content on product demand in the context of TV show viewership. Based on this source of exogenous variation, we estimate an elasticity of TV show ratings (market share in terms of viewership) with respect to the number of relevant comments (comments were disabled during the block) of 0.016. In terms of the behavioral mechanism, we find more post-show microblogging activity increases demand, whereas comments posted prior to the show airing do not affect viewership. These patterns are inconsistent with informative or persuasive advertising effects and suggest complementarity between TV consumption and anticipated post-show microblogging activity.

Keywords: Microblogging, Advertising, Social Media, Word of Mouth

Suggested Citation

Seiler, Stephan and Yao, Song and Wang, Wenbo, Does Online Word-of-Mouth Increase Demand? (and How?) Evidence from a Natural Experiment (March 23, 2017). Marketing Science, 36(6), pp. 838-861, 2017, Stanford University Graduate School of Business Research Paper No. 15-62, Available at SSRN: https://ssrn.com/abstract=2692861 or http://dx.doi.org/10.2139/ssrn.2692861

Stephan Seiler

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research ( email )

London
United Kingdom

Song Yao (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

HOME PAGE: http://www.songyao.org

Wenbo Wang

Hong Kong University of Science & Technology (HKUST) - Department of Marketing ( email )

Department of Marketing
Clear Water Bay, Kowloon
Hong Kong

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