Dynamics of viral marketing

Dynamics of viral marketing - The Dynamics of Viral...

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Unformatted text preview: The Dynamics of Viral Marketing * Jurij Leskovec Carnegie Mellon University Pittsburgh, PA 15213 jure@cs.cmu.edu Lada A. Adamic University of Michigan Ann Arbor, MI 48109 ladamic@umich.edu Bernardo A. Huberman HP Labs Palo Alto, CA 94304 bernardo.huberman@hp.com ABSTRACT We present an analysis of a person-to-person recommenda- tion network, consisting of 4 million people who made 16 million recommendations on half a million products. We ob- served the propagation of recommendations and the cascade sizes, which can be explained by a stochastic model. We then established how the recommendation network grows over time and how effective it is from the viewpoint of the sender and receiver of the recommendations. While on av- erage recommendations are not very effective at inducing purchases and do not spread very far, there are product and pricing categories for which viral marketing seems to be very effective. 1. INTRODUCTION With consumers showing increasing resistance to traditional forms of advertising such as TV or newspaper ads, marketers have turned to alternate strategies, including viral market- ing. Viral marketing exploits existing social networks by encouraging customers to share product information with their friends. Previously, a few in depth studies have shown that social networks affect the adoption of individual inno- vations and products (for a review see [14] or [15]). But until recently it has been difficult to measure how influen- tial person-to-person recommendations actually are over a wide range of products. We were able to directly measure the effectiveness of recommendations by studying one online retailers incentivised viral marketing program. The website gave discounts to customers recommending any of its prod- ucts to others, and then tracked the resulting purchases and additional recommendations. Although word of mouth can be a powerful factor influencing purchasing decisions, it can be tricky for advertisers to tap * A long version of this paper including additional results is available at http://arxiv.org/abs/physics/0509039 This research was done while at HP Labs. Research likewise done while at HP Labs. into. Some services used by individuals to communicate are natural candidates for viral marketing, because the product can be observed or advertised as part of the communication. Free email services such as Hotmail and Yahoo had very fast adoption curves because every email sent through them contained an advertisement for the service. Hotmail spent a mere $50,000 on traditional marketing and still grew from zero to 12 million users in 18 months [7]. Googles Gmail captured a significant part of market share in spite of the fact that the only way to sign up for the service is through a referral....
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Dynamics of viral marketing - The Dynamics of Viral...

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