Whose and what chatter matters? The effect of tweets on movie sales

• Authors: Huaxia Rui;Yizao Liu;Andrew Whinston
• Venue: Decision Support Systems
• Year: 2013

Social broadcasting networks such as Twitter in the U.S. and ''Weibo'' in China are transforming the way online word of mouth (WOM) is disseminated and consumed in the digital age. In the present study, we investigated whether and how Twitter WOM affects movie sales by estimating a dynamic panel data model using publicly available data and well-known machine learning algorithms. We found that chatter on Twitter does matter; however, the magnitude and direction of the effect depend on whom the WOM is from and what the WOM is about. Incorporating the number of followers the author of each WOM message had into our study, we found that the effect of WOM from users followed by more Twitter users is significantly larger than those followed by less Twitter users. In support of some recent findings about the importance of WOM valence on product sales, we also found that positive Twitter WOM is associated with higher movie sales, whereas negative WOM is associated with lower movie sales. Interestingly, we found that the strongest effect on movie sales comes from those tweets in which the authors expressed their intention to watch a certain movie. We attribute this finding to the dual effects of such intention tweets on movie sales: the direct effect through the WOM author's own purchase behavior, and the indirect effect through either the awareness effect or the persuasive effect of the WOM on its recipients. Our findings provide new perspectives to understand the effect of WOM on product sales and have important managerial implications. For example, our study reveals the potential values of monitoring people's intentions and sentiments on Twitter and identifying influential users for companies wishing to harness the power of social broadcasting networks.