Do Friends Influence Purchases In A Social Network?
Source: Harvard University
Social networks, such as Facebook and MySpace have witnessed a rapid growth in their membership. Some of these businesses have tried an advertising-based model with very limited success. However, these businesses have not fully explored the power of their members to influence each other's behavior. This potential viral or social effect can have significant impact on the success of these companies as well as provide a unique new marketing opportunity for traditional companies. This social influence leads to almost 14% drop in the revenue of this group. The authors discuss the theoretical and managerial implications of the results.