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AA #3a: Do Friends Influence Purchases in a Social Network?

12 Apr

This paper in particular intrigued me, as I spend a great deal of time on Facebook, but I refuse to give out any of my information. I’m sorry, I just think it’s dumb overall; I don’t want Facebook having access to my credit card all because I wanted one piece of ‘bling’ on my profile that spelled my name, or extra stuff for my mafia. Dumb. However, I’ve always wondered how people are influenced by each other in regards to buying Facebook (or SNS) related ‘stuff.’ I’ve seen one person start FarmVille, and a week later it’s snowballed to half of my friends’ list and they’re all frantically harvesting fake corn to feed to their fake cows and brag about how they won their fake state fair and just… *shakes head*

This article analysis focuses on friends influence on purchases made in a social network. The primary research questions are: do friends influence purchases (frequency and/or amount) of a user in a social network; which users are more influenced by social pressure; and can we quantify this social influence in terms of percentage increase in sales revenue?

The study uses Cyworld, an online social networking site in Korea. Cyworld allows for users create mini-homepages to interact with their friends. Users are allowed to customize their homepages with wallpapers, music, icons, etc., many of which are actually sold by Cyworld. It follows 10 weeks of purchase and non purchase data across 208 users, which allows them to build a model of choice (buy-no buy) and quantity (how much money to spend).

The categorize and examine three groups within this population: low status group (48% of users) were not well connected, show limited interactions with other members and were unaffected by social pressure. The middle status group (40% of users) is moderately connected , show reasonable non-purchase activities (interactions, messages, etc.) and show a strong positive effect relating to friends’ purchases. As a result, this group’s revenue increases by 5% due to influence. The last group, the high-status group (12% of users), is well connected ad very active on the site, but shows a very significant effect due to friends’ purchases. This group strongly pursued non-purchase related activities, which in turn leads to a 14% drop in revenue of this group. The concluding statements point to the high status group, while not engaging in purchases of product from the site, had an influence on middle status users in buy-no buy scenarios. It points to relevance for SNS and large advertising firms, as it can start to quantify what items are marketable, to what groups, and at prices that populations find reasonable.

I think this paper is particularly interesting, just because it tries to pinpoint exactly what motivates a user to purchase. However, the fact that the authors had to create the user categories makes me wonder what motivated them for those categories; the paper states that it is based on their primary interactions with the site. I want to know is this an accurate, solid reflection of that population. Only 12% of users constitute the high status group, yet it has been shown in other data that countries outside the US are significantly larger, and also much more active, especially in regards to SNS and blogging. Given a site that allows the users some form of absolute ‘control’, I am surprised to see that so few people want to take advantage of it. That discounts the use of funds for ‘decorative’ purposes, mind you.

It makes me wonder if this could be re-ran, with some stricter guidelines and data analysis. I think this is just a scrape at the surface.

-Vanessa B!

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2 Comments

Posted by on April 12, 2011 in Uncategorized

 

2 responses to “AA #3a: Do Friends Influence Purchases in a Social Network?

  1. narayun

    April 27, 2011 at 8:53 pm

    I used Cyworld before..and man I almost bought one of their stupid blings. It’s actually really cute and they aren’t that expensive. I actually knew a lot of kids who buy it due to peer pressure.

     

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