Social Media as an Advertising Tool: Evidence from a Natural Experiment∗

We investigate the causal effect of tweets on product demand using variation in microblogging caused by a partial block of the Chinese microblogging platform Sina Weibo due to political events. We analyze the effect of the activity decrease due to the block on viewership of a large set of TV shows that rely on Sina Weibo as an advertising platform. Using a set of difference-in-difference regressions, we show that viewership decreased more strongly in geographical areas with a higher Sina Weibo penetration and only for shows with a high (pre-block) activity level on Sina Weibo. We quantify the effect on viewership in units of comments on tweets (comments were disabled during the block) by instrumenting the number of relevant comments with a dummy for the time-period of the block, and find an elasticity of TV show viewership with respect to comments of 0.02. A one standard deviation shift in the number of comments implies an increase in revenue from TV advertising of 250,000 dollars per episode. We find no evidence of heterogeneity in the effect across show genre nor for new versus old shows. Microblogging activity returned to the pre-block level immediately, whereas ratings remained at a lower level for a brief period of time shortly after the block.