Michael Wessel

Effects of Social Interaction Dynamics on Platforms

Abstract Despite the increasing relevance of online social interactions on platforms, there is still little research on the temporal interaction dynamics between electronic word-of-mouth (eWOM, a form of opinion-based social interaction), popularity information (a form of action-based social interaction), and consumer decision making. Drawing on a panel data set of more than 23,300 crowdfunding campaigns from Indiegogo, we investigate the dynamic effects of these social interactions on consumers’ funding decisions using the panel vector autoregressive methodology. Our analysis shows that both eWOM and popularity information are critical influencing mechanisms in crowdfunding. However, our overarching finding is that eWOM surrounding crowdfunding campaigns on Indiegogo or Facebook has a significant yet substantially weaker predictive power than popularity information. We also find that whereas popularity information has a more immediate effect on consumers’ funding behavior, its effectiveness decays rather quickly, while the impact of eWOM recedes more slowly. This study contributes to the extant literature by (1) providing a more nuanced understanding of the dynamic effects of opinion-based and action-based social interactions, (2) unraveling both within-platform and cross-platform dynamics, and (3) showing that social interactions are perceived as quality indicators on crowdfunding platforms that help consumers reduce risks associated with their investment decisions. These results can help platform providers and complementors to stimulate contribution behavior and increase the prosperity of a platform.

Opening the floodgates: the implications of increasing platform openness in crowdfunding

Managing platform ecosystems requires providers to govern the permeability of platform boundaries in order to strike a balance between openness and control. But is it worthwhile for platform providers to conduct screening processes for third-party offerings, or should they rather apply a laissez-faire approach and let the market determine winners and losers? In this study, we compare the market conditions on Kickstarter, one of the world’s largest crowdfunding platforms, before and after a policy change that relaxed the previously stringent screening process for new campaigns. By analyzing over 230,000 crowdfunding campaigns with a combined funding of over

A LIE NEVER LIVES TO BE OLD: THE EFFECTS OF FAKE SOCIAL INFORMATION ON CONSUMER DECISION- MAKING IN CROWDFUNDING

1.9 billion that cover a 4-year period around the policy change, we find that increasing platform openness was a double-edged sword for the platform’s ecosystem. While Kickstarter’s revenue from commissions surged after the policy change due to an increase in the number of campaigns available on the platform, funding conditions for project creators and backers deteriorated. Project creators have to cope with lower success rates and an intensified competition due to a growing disproportion of backers to campaigns, while backers face higher uncertainties as project creators invest less in reducing information asymmetries. Our evidence from this natural experiment therefore suggests that increasing platform openness for third-party offerings can destabilize a platform’s ecosystem. We thus extend the literature on platform openness and on the implications of policy changes on platform ecosystems. Our findings also provide practical insights for different platform stakeholders into possible “ripple effects” that are triggered when policy changes alter platform openness.

Network effects on crowdfunding platforms: Exploring the implications of relaxing input control

The growing success of social media led to a strong presence of social information such as customer product reviews and product ratings in electronic markets. While this information helps consumers to better assess the quality of goods before purchase, its impact on consumer decision-making also incentivizes sellers to game the system by creating fake data in favor of specific goods in order to deliberately mislead consumers. As a consequence, consumers could make suboptimal choices or could choose to disregard social information altogether. In this exploratory study, we assess the effects nongenuine social information has on the consumer’s decision-making in the context of reward-based crowdfunding. Specifically, we capture unnatural peaks in the number of Facebook Likes that a specific crowdfunding campaign receives on the platforms Kickstarter and Indiegogo and observe subsequent campaign performance. Our results show that fake Facebook Likes have a very short-term positive effect on the number of backers participating in the respective crowdfunding campaign. However, this peak in participation is then followed by a period in which participation is lower than prior to the existence of the non-genuine social information. We further discuss circumstances that foster this artificial manipulation of quality signals.

The Effects of Personalization on Purchase Intentions for Online News: An Experimental Study of Different Personalization Increments

Crowdfunding has emerged as a viable alternative to venture capital or angel investments in order to raise funds for entrepreneurial initiatives. Despite its growing importance, we still know little about the underlying network effects that drive the evolution and growth of crowdfunding platforms. Specifically, is the evolution and growth primarily driven by a growing number of entrepreneurial projects attracting funders, or do funders primarily attract entrepreneurs, or does a reciprocal relationship exist between the two market sides? We also explore whether and how input control, a common gatekeeping mechanism on platforms, has an impact on the formation of network effects. By analyzing eight years of data on the evolution of Kickstarter, one of the leading reward‐based crowdfunding platforms, we find that network effects are asymmetric. An increasing number of entrepreneurial projects has a strong and significant effect on the installed base of funders (cross‐side network effects) and also attracts other entrepreneurs to the platform (same‐side network effects). However, an increased installed base of funders does not have an effect on the growth of either side of the market. We also find that, under weaker input control, cross‐side network effects and same‐side network effects are weaker and less sustainable. Taken together, our exploratory evidence suggests that the relationship between the market sides on crowdfunding platforms might be less reciprocal than expected, having profound implications for entrepreneurs and providers of crowdfunding platforms.

Understanding the Dynamic Interplay of Social Buzz and Contribution Behavior within and between Online Platforms – Evidence from Crowdfunding

The media industry has been struggling to create sustainable business models for news content in the digital era. While the collapse of the traditional business models can be largely attributed to the rise of information technology, it can also assist in creating new once. Technological advances allow online merchants to offer a variety of personalization features, enabling them to tailor their offerings ever more accurately to the needs and tastes of individual users. We have taken a systematic experimental approach using an online news aggregator to answer the question of how different levels of personalization can affect users’ intentions to pay for news content. Results show that only personalization features that allow the users to constantly adapt the content to their needs yield a significant increase in purchase intention. Furthermore, supplementary design personalization may even decrease users’ intentions to purchase. Results of a post-hoc study with industry experts confirm the practical contribution of our research, demonstrating that some of our key findings are counterintuitive to professionals. Our findings contribute to the literature on web personalization and media management by experimentally demonstrating the value-add of different levels of personalization and by revealing counterintuitive implications for the media industry.