Deriving Value from Social Commerce Networks
Published 4/1/2010
Author: Andrew T. Stephen and Olivier Toubia
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Executive Summary
Social commerce is an emerging trend in which sellers are connected in online social networks and in which sellers are individuals instead of firms. This article examines the economic value implications of a social network between sellers in a large online social commerce marketplace. In this marketplace, each seller creates his or her own shop, and network ties between sellers are directed hyperlinks between their shops. This research explores the intersection of social networks, online retailing, and electronic commerce. Three questions are addressed: (1) Does allowing sellers to connect to one another create value (i.e., increase sales)? (2) What are the mechanisms through which this value is created? and (3) How is this value distributed across sellers in the network and how does the position of a seller in the network (e.g., its centrality) influence how much it benefits or suffers from the network?
The authors find that (1) allowing sellers to connect generates considerable economic value, (2) the network’s value lies primarily in making shops more accessible to customers browsing the marketplace (the network creates a “virtual shopping mall”), and (3) the sellers that benefit the most from the network are not necessarily those that are central to the network but rather those whose accessibility is most enhanced by the network. Furthermore, the findings suggest that some features of online social networks may not be compatible with achieving commercial profit-making goals. This is timely given the current interest in adding commercial marketplace features to online social networks (e.g., Facebook, MySpace) and in adding social networking features to existing electronic marketplaces, all in the name of establishing new sources of revenue.
Biography
Andrew T. Stephen is Assistant Professor of Marketing at INSEAD. He received his PhD in Marketing from the Columbia University. He also holds business and engineering degrees from the University of Queensland (Brisbane, Australia). His research focuses on social networks, electronic commerce, social contagion, word-of-mouth, behavioral economics, and emotions in decision making.
Olivier Toubia is David W. Zalaznick Associate Professor of Business in the Columbia Business School at Columbia University. He is a graduate from Ecole Centrale Paris (Paris, France), and holds a MS in Operations Research and a PhD in Marketing, both from Massachusetts Institute of Technology. His research focuses on new product development, adaptive experimental design, conjoint analysis, preference measurement, idea generation, idea screening, the diffusion of innovation, behavioral economics, and social networks.
Journal of Marketing Research, Volume 47, Number 2, April 2010
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