Is Oprah Contagious? Identifying Demand Spillovers in Online Networks

We study the spread of exogenous demand shocks generated by book reviews featured on the Oprah Winfrey TV show and published in the New York Times through the online co-purchase recommendation network on Amazon.com. We analyze the co-purchase recommendation network on Amazon.com to determine how such exogenous events might affect the demand for books that were not explicitly mentioned in a review but are located “close” to reviewed books in the network. Using a difference-in-differences matched-sample approach, we identify the extent of variation caused by membership in this network. Our results show that the demand shock diffuses to books that are up to five links away from the reviewed book, and that this diffused shock persists for a substantial number of days. However, the depth and the magnitude of diffusion vary widely across books at the same network distance from reviewed products. We also describe how product characteristics, assortative mixing and local network properties can explain this variation in the depth and persistence of contagion. Specifically, highly clustered local networks “trap” the diffused demand shocks, causing them to last longer and be more pronounced while restricting the distance of the shocks’ spread. Conversely, less clustered networks lead to wider contagions of lower magnitude and duration. We discuss the significance of these results and their implications for the design of networks of products as well as optimizing digital marketing spillovers.