We study the impact of social influence on the performance of ads on social networks. Using data for
several ads on Facebook for two different firms, we measure the impact of past connections on the click
Social media platforms are gaining popularity among firms due to their potential ability to use social
influence as a more effective way to reach out to individuals. Several studies have demonstrated the
usefulness of social media in the promotion of products (Aral and Walker, 2011), diffusion of information
goods (Susarala et al. 2010; Yoganarasimhan 2012) and diffusion of prescription drugs ( Iyengar et al.
2011). Another possible avenue for using social media is brand promotion. Firms can use a social
platform to spread information about their activities and promote their brand. Facebook, one of the most
popular social platforms, provides such an opportunity to firms using a feature called sponsored stories.
Users can endorse firm related activity promoted as a sponsored story by the firm and make a connection
with the firm on the Facebook platform using a ‘Like’.1
If a user endorses a firm, other users in their
social network can see the endorsement. They, in turn, can evaluate the firm related information by
clicking the sponsored story and also endorse the brand by using a ‘Like’. A potential benefit of social ads
over display ads is that these are targeted at individuals who have already endorsed the ad and likely to
have similar preferences. Thus, the performance can be much better as compared to display ads where the
target audience is not very well known. Further, if more friends connect with the ad and this social
influence leads to higher success for advertisements then advertisers can increase their exposure and
increase the number of connections by making higher payment. An important question is whether the
social influence plays a role in brand promotion on a social platform such as Facebook. This is important
as firms have to evaluate their return from these platforms as compared to other media such as television,
print, banner and search ads and have to allocate appropriate budgets to promotions through such
platforms. While Facebook generates significant revenue from its sponsored stories2
, current market
We study the impact of social influence on the performance of ads on social networks. Using data forseveral ads on Facebook for two different firms, we measure the impact of past connections on the clickSocial media platforms are gaining popularity among firms due to their potential ability to use socialinfluence as a more effective way to reach out to individuals. Several studies have demonstrated theusefulness of social media in the promotion of products (Aral and Walker, 2011), diffusion of informationgoods (Susarala et al. 2010; Yoganarasimhan 2012) and diffusion of prescription drugs ( Iyengar et al.2011). Another possible avenue for using social media is brand promotion. Firms can use a socialplatform to spread information about their activities and promote their brand. Facebook, one of the mostpopular social platforms, provides such an opportunity to firms using a feature called sponsored stories.Users can endorse firm related activity promoted as a sponsored story by the firm and make a connectionwith the firm on the Facebook platform using a ‘Like’.1 If a user endorses a firm, other users in theirsocial network can see the endorsement. They, in turn, can evaluate the firm related information byclicking the sponsored story and also endorse the brand by using a ‘Like’. A potential benefit of social adsover display ads is that these are targeted at individuals who have already endorsed the ad and likely tohave similar preferences. Thus, the performance can be much better as compared to display ads where thetarget audience is not very well known. Further, if more friends connect with the ad and this socialinfluence leads to higher success for advertisements then advertisers can increase their exposure andincrease the number of connections by making higher payment. An important question is whether thesocial influence plays a role in brand promotion on a social platform such as Facebook. This is importantas firms have to evaluate their return from these platforms as compared to other media such as television,print, banner and search ads and have to allocate appropriate budgets to promotions through suchplatforms. While Facebook generates significant revenue from its sponsored stories2, current market
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