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- Peer influence in the diffusion of iPhone 3G over a large social networkPublication . Matos, Miguel Godinho de; Ferreira, Pedro; Krackhardt, DavidIn this paper, we study the effect of peer influence in the diffusion of the iPhone 3G across a number of communities sampled from a large dataset provided by a major European Mobile carrier in one country. We identify tight communities of users in which peer influence may play a role and use instrumental variables to control for potential correlation between unobserved subscriber heterogeneity and friends' adoption. We provide evidence that the propensity of a subscriber to adopt increases with the percentage of friends who have already adopted. During a period of 11 months, we estimate that 14 percent of iPhone 3Gs sold by this carrier were due to peer influence. This result is obtained after controlling for social clustering, gender, previous adoption of mobile Internet data plans, ownership of technologically advanced handsets, and heterogeneity in the regions where subscribers move during the day and spend most of their evenings. This result remains qualitatively unchanged when we control for changes over time in the structure of the social network. We provide results from several policy experiments showing that, with this level of effect of peer influence, the carrier would have hardly benefitted from using traditional marketing strategies to seed the iPhone 3G to benefit from viral marketing.
- The effect of subscription video-on-demand on piracy: evidence from a household-level randomized experimentPublication . Matos, Miguel Godinho de; Ferreira, Pedro; Smith, Michael D.We partner with a major multinational telecommunications provider to analyze the effect of subscription video-on-demand (SVoD) services on digital piracy. For a period of 45 consecutive days, a group of randomly selected households who used BitTorrent in the past were gifted with a bundle of TV channels with movies and TV shows that could be streamed as in SVoD. We find that, on average, households that received the gift increased overall TV consumption by 4.6% and reduced Internet downloads and uploads by 4.2% and 4.5%, respectively. However, and also on average, treated households did not change their likelihood of using BitTorrent during the experiment. Our findings are heterogeneous across households and are mediated by the fit between the preferences of households in our sample for movies and the content available as part of the gifted channels. Households with preferences aligned with the gifted content reduced their probability of using BitTorrent during the experiment by 18% and decreased their amount of upload traffic by 45%. We also show using simulation that the size of the SVoD catalog and licensing window restrictions limit significantly the ability of content providers to match SVoD offerings to the preferences of BitTorrent users. Finally, we estimate that households in our sample are willing to pay at most $3.25 USD per month to access a SVoD catalog as large as Netflix's in the United States. Together, our results show that, as a stand-alone strategy, using legal SVoD to curtail piracy will require, at the minimum, offering content much earlier and at much lower prices than those currently offered in the marketplace, changes that are likely to reduce industry revenue and that may damage overall incentives to produce new content while, at the same time, curbing only a small share of piracy.
- The impact of time shifting on TV consumption and ad viewershipPublication . Belo, Rodrigo; Ferreira, Pedro; Matos, Miguel Godinho de; Reis, FilipaIn this paper we study the impact of time shifting on TV consumption and ad viewership. We analyze the results of a field experiment in which a random sample of “triple-play” households were given a set of premium TV channels broadcasting popular movies and TV shows without commercial breaks. A random subset of these households were given access to these channels with time shifting (automated cloud recording for later viewing or rewinding of broadcasted programs), while the remainder were not. This design allowed us to identify the effects of time shifting on TV consumption. On average, we found that receiving access to the channels with time shifting increased total TV consumption because it increased time-shifted viewership while leaving live viewership unchanged. The increase in the live viewership of these channels was similar to the reduction in the live viewership of the originally available channels, resulting in a net zero effect on live viewership. It appears that time shifting does not change the concentration of live viewership, but it does increase the concentration of total TV viewership, because it is used disproportionately to watch the most popular programs. Finally, we found that time shifting does not change the likelihood of skipping ads during live viewership, suggesting that households do not use time shifting to strategically avoid ads.
- Culling the herd: using real-world randomized experiments to measure social bias with known costly goodsPublication . Matos, Miguel Godinho de; Ferreira, Pedro; Smith, Michael D.; Telang, RahulPeer ratings have become increasingly important sources of product information, particularly in markets for information goods. However, in spite of the increasing prevalence of this information, there are relatively few academic studies that analyze the impact of peer ratings on consumers transacting in real-world marketplaces. In this paper, we partner with a major telecommunications company to analyze the impact of peer ratings in a real-world video-on-demand market where consumer participation is organic and where movies are costly and well known to consumers. After experimentally changing the initial conditions of product information displayed to consumers, we find that, consistent with the prior literature, peer ratings influence consumer behavior independently from underlying product quality. However, we also find that, in contrast to the prior literature, there is little evidence of long-term bias as a result of herding effects, at least in our setting. Specifically, when movies are artificially promoted or demoted in peer rating lists, subsequent reviews cause them to return to their true quality position relatively quickly. One explanation for this difference is that consumers in our empirical setting likely had more outside information about the true quality of the products they were evaluating than did consumers in the studies reported in prior literature. Although tentative, this explanation suggests that in real-world marketplaces where consumers have sufficient access to outside information about true product quality, peer ratings may be more robust to herding effects and thus provide more reliable signals of true product quality than previously thought.
- The effect of friends’ churn on consumer behavior in mobile networksPublication . Ferreira, Pedro; Telang, Rahul; Matos, Miguel Godinho deWe study how consumers decide which tariff plan to choose and whether to churn when their friends churn in the mobile industry. We develop a theoretical model showing conditions under which users remain with their carrier and conditions under which they churn when their friends do. We then use a large and rich anonymized longitudinal panel of call detailed records to characterize the consumers’ path to death with unprecedented level of detail. We explore the structure of the network inferred from these data to derive instruments for friends’ churn, which is typically endogenous in network settings. This allows us to econometrically identify the effect of peer influence in our setting. On average, we find that each additional friend that churns increases the monthly churn rate by 0.06 percent. The observed monthly churn rate across our dataset is 2.15 percent. We also find that firms introducing the pre-paid tariff plans that charge the same price to call users inside and outside the carrier help retain consumers that would otherwise churn. In our setting, without this tariff plan the monthly churn rate could have been as high as 8.09 percent. We perform a number of robustness checks, in particular to how we define friends in the social graph, and show that our results remain unchanged. Our paper shows that the traditional definition of customer lifetime value underestimates the value of consumers and, in particular, that of consumers with more friends due to the effect of contagious churn and, therefore, managers should actively take into account the structure of the social network when prioritizing whom to target during retention campaigns.
- Target the ego or target the group: evidence from a randomized experiment in proactive churn managementPublication . Matos, Miguel Godinho de; Ferreira, Pedro; Belo, RodrigoWe propose a new strategy for proactive churn management that actively uses social network information to help retain consumers. We collaborate with a major telecommunications provider to design, deploy, and analyze the outcomes of a randomized control trial at the household level to evaluate the effectiveness of this strategy. A random subset of likely churners were selected to be called by the firm. We also randomly selected whether their friends would be called. We find that listing likely churners to be called reduced their propensity to churn by 1.9 percentage points from a baseline of 17.2%. When their friends were also listed to be called, their likelihood of churn reduced an additional 1.3 percentage points. The client lifetime value of likely churners increased 2.1% with traditional proactive churn management, and this statistic becomes 6.4% when their friends were also listed to be called by the firm. We show that, in our setting, likely churners receive a signal from their friends that reduces churn among the former. We also discuss how this signal may trigger mechanisms akin to both financial comparisons and conformity that may explain our findings.