DIGITALRULES.org

Florian Stahl @ March 24, 2013 3:26 pm

Information in Digital, Economic, and Social Networks

Arun Sundararajan, Foster Provost, Gal Oestreicher-Singer and Sinan Aral provides an comprehensive summary of research focusing on “information in networks”—its distribution, its diffusion, its inferential value, and its influence on social and economic outcomes. This summary will be published soon in the journal Information System Research

Information in Digital, Economic, and Social Networks

Abstract:

Digital technologies have made networks ubiquitous. A growing body of research is examining these networks to gain a better understanding of how firms interact with their consumers, how people interact with each other, and how current and future digital artifacts will continue to alter business and society. The increasing availability of massive networked data has led to several streams of inquiry across fields as diverse as computer science, economics, information systems, marketing, physics, and sociology. Each of these research streams asks questions that at their core involve “information in networks”—its distribution, its diffusion, its inferential value, and its influence on social and economic outcomes. We suggest a broad direction for research into social and economic networks. Our analysis describes four kinds of investigation that seem most promising. The first studies how information technologies create and reveal networks whose connections represent social and economic relationships. The second examines the content that flows through networks and its economic, social, and organizational implications. A third develops theories and methods to understand and utilize the rich predictive information contained in networked data. A final area of inquiry focuses on network dynamics and how information technology affects network evolution. We conclude by discussing several important cross-cutting issues with implications for all four research streams, which must be addressed if the ensuing research is to be both rigorous and relevant. We also describe how these directions of inquiry are interconnected: results and ideas will pollinate across them, leading to a new cumulative research tradition.

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Florian Stahl @ April 13, 2012 4:49 pm

Does Chatter Really Matter? Dynamics of User-Generated Content and Stock Performance

Weblog Category: Economics,Market Development

Wall Street Journal (WSJ) published today an article “Online Chatter That Moves Markets” in which Christopher Shea summarizes the findings of an recently appeared in the journal Marketing Science:

Does Chatter Really Matter? Dynamics of User-Generated Content and Stock Performance

By Seshadri Tirunillai and Gerard J. Tellis

Abstract:

This study examines whether user-generated content (UGC) is related to stock market performance, which metric of UGC has the strongest relationship, and what the dynamics of the relationship are. We aggregate UGC from multiple websites over a four-year period across 6 markets and 15 firms. We derive multiple metrics of UGC and use multivariate time-series models to assess the relationship between UGC and stock market performance.

Volume of chatter significantly leads abnormal returns by a few days (supported by Granger causality tests). Of all the metrics of UGC, volume of chatter has the strongest positive effect on abnormal returns and trading volume. The effect of negative and positive metrics of UGC on abnormal returns is asymmetric. Whereas negative UGC has a significant negative effect on abnormal returns with a short “wear-in” and long “wear-out,” positive UGC has no significant effect on these metrics. The volume of chatter and negative chatter have a significant positive effect on trading volume. Idiosyncratic risk increases significantly with negative information in UGC. Positive information does not have much influence on the risk of the firm. An increase in off-line advertising significantly increases the volume of chatter and decreases negative chatter. These results have important implications for managers and investors.

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Florian Stahl @ March 30, 2012 9:58 pm

Impact of social network structure on content propagation: A study using YouTube data

Weblog Category: Business Strategy,Economics

This month a research paper in the journal Quantitative Marketing & Economics, which shows how network structure of the author affect content diffusion.

Impact of social network structure on content propagation: A study using YouTube data

By Hema Yoganarasimhan

Abstract:

Hema Yoganarasimhan studies how the size and structure of the local network around a node affects the aggregate diffusion of products seeded by it. She examines this in the context of YouTube, the popular video-sharing site. Hema Yoganarasimhan address the endogeneity problems common to this setting by using a rich dataset and a careful estimation methodology. She empirically demonstrate that the size and structure of an author’s local network is a significant driver of the popularity of videos seeded by her, even after controlling for observed and unobserved video characteristics, unobserved author characteristics, and endogenous network formation. Her findings are distinct from those in the peer effects literature, which examines neighborhood effects on individual behavior, since she documents the causal relationship between a node’s local network position and the global diffusion of products seeded by it. Her results provide guidelines for identifying seeds that provide the best return on investment, thereby aiding managers conducting buzz marketing campaigns on social media forums. Further, our study sheds light on the other substantive factors that affect video consumption on YouTube.

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Florian Stahl @ October 2, 2011 7:35 pm

Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales

New Articles related to the Digital Economy in Management Science

Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales

By Erik Brynjolfsson, Yu (Jeffrey) Hu, and Duncan Simester

Abstract:
Many markets have historically been dominated by a small number of best-selling products. The Pareto principle, also known as the 80/20 rule, describes this common pattern of sales concentration. However, information technology in general and Internet markets in particular have the potential to substantially increase the collective share of niche products, thereby creating a longer tail in the distribution of sales. This paper investigates the Internet’s “long tail” phenomenon. By analyzing data collected from a multi-channel retailer, it provides empirical evidence that the Internet channel exhibits a significantly less concentrated sales distribution when compared with traditional channels. Previous explanations for this result have focused on differences in product availability between channels. However, we demonstrate that the result survives even when the Internet and traditional channels share exactly the same product availability and prices. Instead, we find that consumers’ usage of Internet search and discovery tools, such as recommendation engines, are associated with an increase the share of niche products. We conclude that the Internet’s long tail is not solely due to the increase in product selection but may also partly reflect lower search costs on the Internet. If the relationships we uncover persist, the underlying trends in technology portend an ongoing shift in the distribution of product sales.

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Florian Stahl @ September 21, 2011 7:57 pm

Industrial Organization and the Digital Economy

Many books about the Internet and digital economy exist – most are useless.

A exceptional book about the digital economy which focus on the ecomics of the digital economy (or least some aspects of the digital economy)is the book “Industrial Organization and the Digital Economy” by Gerhard Illing (Editor), Martin Peitz (Editor) published at MIT Press.

Industrial Organization and the Digital Economy

Short book description:
Digital technology has dramatically changed the structure of many industrial sectors. The rise of the Internet and increased broadband access have given rise to new business models and strategies for firms dealing with both electronic and physical goods. Industrial Organization and the Digital Economy focuses on changes in the two industries most affected by the new technology: software and music. The book offers the theoretical and factual grounding necessary for understanding the changes in industrial organization brought about by the digital economy, with the chapters together providing an accessible and interesting cross-fertilization of fact and theory. Moreover, two chapters demonstrate the relevance of the emerging literature on two-sided markets for the digital economy.The contributors consider such topics as the innovation value of software; empirical evidence and theoretical analysis regarding the impact of file sharing on music sales; the ability of firms to modify their products and offer them in different versions; the practice of preannouncing information goods; the effects of electronic commerce on both consumers and retailers; and price-setting by electronic mediators. The studies in Industrial Organization and the Digital Economy provide a valuable starting point for future research on other aspects of the subject, including the open-source movement and trust and reputation.Contributors:Paul Belleflamme, Jay Pil Choi, Emin M. Dinlersoz, David S. Evans, Chaim Fershtman, Neil Gandal, Amit Gayer, Andrei Hagiu, Gerhard Illing, Bruno Jullien, Eirik Gaard Kristiansen, Stan J. Liebowitz, Jae Nahm, Martin Peitz, Pedro Pereira, Richard Schmalensee, Oz Shy, Patrick Waelbroeck

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Florian Stahl @ September 9, 2011 1:20 pm

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

A research paper recently accepted in the Marketing Science Journal got my attention:

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

byPaulo Albuquerque, Polykarpos Pavlidis, Udi Chatow, Kay-Yut Chen, Zainab Jamal, Kok-Wei Koh

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-Packards (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 firms 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.

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