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The rise of electronic social networks and implications for advertisers

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  • Zakaria Babutsidze

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, SKEMA Business School - SKEMA Business School, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)

Abstract

The rise 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.

Suggested Citation

  • Zakaria Babutsidze, 2018. "The rise of electronic social networks and implications for advertisers," SciencePo Working papers Main hal-03471523, HAL.
    • Handle: RePEc:hal:spmain:hal-03471523
    DOI: 10.1016/j.techfore.2018.06.010
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03471523
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    Keywords

    Social networking; Word of mouth; Advertising; Consumer behaviour;
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