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MIT CDB Assistant Professor, Renee Gosline, Describes Digital Marketing's Newest Influencers

MIT CDB Video: Sinan Aral on Social Commerce

At the recent MIT CDB conference on Big Data, professor and social networking expert, Sinan Aral, discusses peer influence and how it can impact product marketing strategies and the online economy.

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As social media becomes more pervasive in business and economic life, many researchers are trying to figure out just how much impact it is having on sales and on business models.


Jeffrey Hu, Associate Professor at Scheller College of Business  at Georgia Institute of Technology, and an MIT Sloan alumni, is among those studying the effects of social media. In particular, he examined just how much online broadcasting channels and crowdsourcing are influencing markets and customers compared with more traditional marketing channels. “With the emergence of social media and Web 2.0, broadcasting in the online environment has evolved into a new form of marketing due to the much broader reach enabled by information technology,” Hu said.hu_jeffrey_profile.jpg1.jpg


Turning Buzz into Business

During 2008 to 2009, Hu studied the patterns of the MySpace music community, the largest at the time, with 14 million users. He wanted to know if broadcasting information via social media –sending updates, bulletins and texts (this was before Twitter really had a strong presence) would result in greater economic returns. In other words, he said at a recent MIT CDB lunch seminar, “whether buzz could turn into sales.”


Hu and his team employed a panel vector auto-regression (PVAR) model to investigate the inter-relationship between broadcasting promotions in social media and music sales. By correlating social media activity of 631 musicians for 32 weeks and comparing the data to Amazon rankings, Hu was able to see a significant effect on sales. The study accounted for control variables such as promotional spending, new album releases and size of network, among other factors.


The research concludes that artist-generated content -- particularly personal messages versus automated ones-- can increase sales and ranking on Amazon. By extension, Hu believes that companies can use social media to promote products and boost sales. “Our findings also point to the importance of conducting captivating conversations with customers in the organizational use of social media,” he said.


The Wisdom of Crowds

The second study Hu described at the seminar looked at the wisdom of crowds and crowdsourcing compared with expert advice and content online. Many people have pointed out that while Wikipedia contains errors, for example, it also can be corrected quickly from a vast range of sources versus traditional, permanent resources such as print encyclopedias. Some advocates believe that customers turn to peer-based communities, such as Yelp, for restaurant reviews over venerable sources like Michelin guides because the websites are more current, are more accessible and have wider coverage areas.


In his research of the financial analysis sector, Hu found that the online community Seeking Alpha--which relies on investor input instead of journalists or professional analysts-- has been “surprisingly accurate” in predicting financial trends and making investment recommendations.


Of course, there are also many caveats where enterprise social media is concerned. As McKinsey notes in this recent journal article, “on-demand marketing” is putting enormous pressures on businesses to respond in four key areas:

1. Now: Consumers will want to interact anywhere at any time.

2. Can I: They will want to do truly new things as disparate kinds of information (from financial accounts to data on physical activity) are deployed more effectively in ways that create value for them.

3. For me: They will expect all data stored about them to be targeted precisely to their needs or used to personalize what they experience.

4. Simply: They will expect all interactions to be easy.


Maybe the next studies will focus on how well social media can help achieve these daunting consumer demands.



For related MIT research about social advertising, see this blog describing Catherine Tucker’s research.

For  more of Jeffrey Hu's research, see the following abstracts:


and his Georgia Tech profile here:


MIT Sloan Professor Scott Stern’s latest research draws a clear correlation between the elements present at the founding of entrepreneurial startups and their later success. In addition, he and MIT doctoral candidate Jorge Guzman, use other widely available data-- such as incorporation information, patents, trademarks, IPOs and venture capital funding-- to measure and identify the potential for future growth.


The findings of the study, “Nowcasting and Placecasting Growth Entrepreneurship,” were presented at an MIT IDE seminar in March by Stern, who is Professor of Management of Technology and Chair of the Technological Innovation, Entrepreneurship and Strategic Management Group at the MIT Sloan School of Management. He and Guzman were not only able to draw conclusions, but to observe data-documented entrepreneurial trends, using algorithms and estimation models. These can “help us understand the origins and dynamics of startups,” Stern said.


Shifting Growth Patterns

Placecasting can be used to “evaluate the role of regional ecosystems” in the growth—and decline -- of startups, and to identify clusters of “hyperinnovation.” “Our approach allows us to track the changing locational patterns of growth entrepreneurs over time,” and in real-time, he said, as opposed to traditional, static survey methods. For example, “in Massachusetts, we are able to document the transition from Route 128 growth entrepreneurship to clustering in Kendall Square in Cambridge and Boston.” Similarly, in California, he is tracking the move of entrepreneurship from Silicon Valley to San Francisco.

guzman chart.JPG

Using what he calls nowcasting, Stern expects to develop a predictive model of growth outcomes and assign a probability of growth based on current developments and past indicators. It will also be easier to spot and evaluate why some firms will not succeed. Going forward, Stern also understands that the pace of change and the “app economy” will require new criteria and there will be new shifts to track.


Stern works widely with both companies and governments in understanding the drivers and consequences of innovation and entrepreneurship, and has worked extensively in understanding the role of innovation and entrepreneurship in competitiveness and regional economic performance. For more about regional clusters, watch this video and for more on the research, contact Stern at .