The rise of electronic social networks and implications for advertisers

Publication date: Available online 25 June 2018Source: Technological Forecasting and Social ChangeAuthor(s): Zakaria BabutsidzeAbstractThe raise of modern digital communication technologies, most notably electronic social networks, transforms structures through which consumers interact with one another. In this paper we distinguish between two channels through which product promotion affects sales. The direct channel always positively affects consumers' pre-purchase valuation. The indirect channel goes through word-of-mouth (WoM) and can be either positive or negative. The sentiment contained in WoM is generated by the complex interaction process and depends on the aggressiveness of the advertising campaign. We investigate the implications of the current changes in social network architectures for the effectiveness of the indirect channel. We show that changes in social structures have increased the efficiency of WoM across a host of industries. Our results call for “smart” advertising policies.

Source: Technological Forecasting and Social Change - July 5, 2018 Category: Science Source Type: research