Your Members Are Also Your Customers: Marketing for Internet Social Networks

Perhaps the fastest growing arena in the World Wide Web is the space of social networking sites (e.g., Friendster, Facebook, MySpace). The success of these sites directly depends on the number and activity level of their users. What attracts users to the site is a continually changing digital content (e.g., messages, pictures, photos, music, videos, blogs) generated by other users. In contrast, e-commerce sites (e.g., Amazon) or portals (e.g., Yahoo!) can support their well being by manipulating content (adding products, adjusting prices, updating news, etc.). We propose a model which allows social networking site managers to identify community members whose network influence makes them important for the business. We link individual user activity to the online behavior of other users in the network. Using Bayesian methods and a variable selection approach, we infer which users in the community are “influential” in affecting the site usage of other members. The developed method is specifically tailored to the variable selection task with a very large number of predictors. We show that in a user-generated content environment, network effects are critical in determining a customer’s value to the firm. We find significant heterogeneity among users on two dimensions: susceptibility to influence from other users and the extent of influence on others in the network. Our findings indicate that social influence in an online community is similar to what is experienced offline. The average user is influenced by very few other network members and, in turn, influences very few others. Finally, a small proportion of people (25% of community members) participates in a major share (75%) of all influential ties identified in the social network.