Effects of Word-of-Mouth Versus Traditional Marketing: Findings from an Internet Social Networking Site

For your marketing

Possible founder application

Instrument referral activity and evaluate its delayed contribution alongside paid or event-driven acquisition. Do not compare elasticities as though they were comparable ROI without cost and causal attribution data.

Reported result

What the study found

Word-of-mouth referrals had longer carryover effects than traditional marketing actions in this setting. The estimated long-run signup elasticity for word of mouth was 0.53 and substantially exceeded the estimated elasticities for marketing events and media appearances.

Research question

What the authors investigated

How does member-to-member word of mouth compare with traditional marketing in driving signups at an online social network?

Design

The authors link tracked electronic invitations, conventional marketing activity and new member signups over time, using a vector autoregression to account for dynamic relationships and feedback among the series.

Sample and setting

One Internet social networking site with observable invitations and promotional activity; the paper analyzes signup dynamics and marketing events over time.

Scope and transfer

Limitations to keep in view

A single online social network and observational time-series estimates; the estimated relationships may not transfer to other businesses or channels. The study does not equate elasticity with causal return on spend.

Research sources

Journal citation verified in publisher-linked sources; abstract and author-hosted paper support setting and findings.