Does Online Word-of-Mouth Increase Demand? (and How?) Evidence from a Natural Experiment

We leverage a temporary block of the Chinese microblogging platform Sina Weibo due to political events, to estimate the causal effect of online word-of-mouth content on product demand in the context of TV show viewership. Based on this source of exogenous variation, we estimate an elasticity of TV show ratings (market share in terms of viewership) with respect to the number of relevant comments (comments were disabled during the block) of 0.016. In terms of the behavioral mechanism, we find more post-show microblogging activity increases demand, whereas comments posted prior to the show airing do not affect viewership. These patterns are inconsistent with informative or persuasive advertising effects and suggest a complementarity between TV consumption and anticipated post-show microblogging activity.

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