Social Advertising: Does Social Influence Work?

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 rate and endorsement rate of ads. We find that increase in the connections does not lead to an increase in the click performance and may even decrease the click performance. We also find that increase in connections can increase the endorsement rate of ads provided that ads have been clicked. However, when the number of connections is very large the connection performance may also reduce. Our results inform advertisers on how the social influence impacts the performance of their ads and how should they advertise on social platforms such as Facebook. Our results also provide insight into consumer behavior in social networks. Specifically we show that consumers are less likely to be influenced by social connections to click ads. However, if they do click ads they are more likely to endorse ads if more of their connections do.