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

58 Pages Posted: 20 Nov 2015 Last revised: 4 Apr 2017

Stephan Seiler

Stanford Graduate School of Business

Song Yao

Northwestern University

Wenbo Wang

Hong Kong University of Science & Technology

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, Forthcoming; 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

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Song Yao (Contact Author)

Northwestern University ( email )

Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States

Wenbo Wang

Hong Kong University of Science & Technology ( email )

Department of Marketing
Clear Water Bay, Kowloon
Hong Kong

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