In progress Social Advertising

Reference:
ERIM PhD 2013 RSM LIS 05 EvH_TL

Abstract

Abstract
Social Media has been established as major communications tool within our societies.
Over a billion people actively use the most popular social media platform Facebook
every month. To be able to provide services to such a huge amount of users social
media platforms mostly rely on revenue generated through selling advertising space.
Social advertising, which is the advertising presented to users on social media, relies
on several mechanisms to address consumers with personalized content. Advertisers
can target consumers based on their preferences and demographics but also based on
their underlying social networks. By making use of the information regarding user
connections both social influence and homophily of users are used to positively
influence advertising performance. Despite these seemingly tremendous
opportunities for advertisers, the performance of this new channel for digital
advertising remains unsatisfactory for a lot of advertisers. We propose 4 studies to
help shed light into the underlying mechanisms of social advertising and design more
effective social ads both for advertisers and consumers. (1) We analyze retargeted
marketing in a social media context and identify how closely consumers should be
retargeted in terms of product specificity, temporal distance, as well as social
endorsement. (2) We investigate the influence of social endorsement on privacy
concerns of users and other advertising performance defining variables in the context
of social advertising. (3) We show that social advertising addresses consumers early
on in their purchase decision process and suggest a more sophisticated success
attribution model to capture spillover and carryover effects. (4) Lastly, we examine
social advertising on mobile devices and look into cross-device dynamics of
advertising performance.

Keywords

Advertising Effectiveness, Facebook, Mobile Marketing, Privacy Concerns, Purchase Decision Process, Retargeted Marketing, Social Advertising, Social Endorsement, Social Influence, Social Media, Success Attribution

Time frame

2013 - 2017

Topic

Companies consider going social as a must because users now spend nearly 23% of the time online on social networking sites, far more than they played games (9.8%) and sent e-mail (7.6%). Social media marketing investments are expected to increase 300% in the period between 2010 and 2014, reaching an estimated worth of $3.1 billion. Nevertheless, social media is by many companies still seen as an IT fashion, one that companies have to chase for due to its uncertain effects on individuals and one that is difficult to measure success [11, 29]. On social media, users are not only consumers, but also active contributors, of content. Much of that content has concrete economic value that is often embedded in it. The aim of this research project is to contribute to an understanding of the economic value of the new kinds of user generated content, especially in terms of market information aggregation.

Researchers have made considerable progress examining whether social media can be used to predict sales and firm value [6, 10, 12, 15], but have developed little theoretically-based knowledge to study the extent to which public sentiments released on social media platforms improve individual informedness and market information environment. This research project will answer the question how individuals are affected by the improved informedness and whether this information aggregation predicts future firm and market performance. This research consists of three parts and examines the social interactions on user generated content for three types of goods: physical goods (supply chain), digital goods (movie, music and TV programs), and financial goods (financial market).

Supply Chain. In the supply chain, the profits of any supply chain depend on the demand, and how effectively supply managers fulfill it. Only if customers demand for a particular product or service will the procurement process begin which in turn will motivate the supply chain. Using social media, customers now may voice opinions clearly and precisely about the quality of the products and services, which improves market transparency [9]. Firms now can not only understand sooner of the customer requirements through social media, but also use it to respond to any sort of internal or external issue in the supply chain. With social media, it is possible to check the probable effects of a change in advance, and to use it for product marketing, customer service, sales, news updates and recruiting for procurement services in the supply chain. The questions are: How can firm and consumer interactions on social media platforms (e.g., Facebook, Twitter) be used to make the supply chain more efficient? How to setup social media channels to facilitate and influence the success of firm and supply chain?

Digital Goods. A burgeoning literature examined whether user generated content can be used to proxy for word of mouth and predict movieĀ“s box office revenues [8], music album sales [7], and video game sales [16]. How about TV programs such as The Voice of Holland? Social media is giving television viewers a forum and a voice to debate their favorite shows. The question is whether one can harness the buzz generated on social media platforms to predict viewers or sales and help network and advertisers to effectively build viewer engagement.

Financial Market. In the financial market, increasingly, individual traders move to social media platforms and embrace them as an interactive platform, because they allow users to not only check out information but also express opinions and comments related to companiesĀ“ performance [2]. With the abundance of information sources available to individuals, investors become more informed [1, 4, 5, 6]. Business Week [3] in 2009 called these tweets "a Bloomberg for the average guy" and Bloomberg itself has incorporated tweets into their terminals. The value of financial tweets is further underlined by TIME [13] in 2009, stating that "Twitter will become a huge platform for discussing stocks and other financial instruments [...] Communities of active investors and day traders who are sharing opinions and in some case sophisticated research about stocks, bonds and other financial instruments will actually have the power to move share prices." This motivates the research questions that related to the financial market: Can the public sentiments released on Twitter be used to predict the stock market performance? How does it complement other types of social media information (e.g., Google search, Wikipedia, Financial News)? Furthermore, can we device a trading strategy that incorporates the public sentiments from social media to beat the market, whilst accounting for trading costs?

Supervisory Team

Eric van Heck
Professor of Information Management and Markets
  • Promotor
Ting Li
Endowed Professor of Digital Business
  • Daily Supervisor