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Working Paper

Measuring the Value of Word-of-Mouth and Its Impact in Consumer Communities

Paul Dwyer, 2006 [06-118]

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Word-of-mouth is a network phenomenon: by exchanging units of discourse on the Internet, consumers create informational and social networks. Current measures of such consumer-generated media focus on quantity (number of word-of-mouth occurrences) but not the influence this word-of-mouth exerts. In this study, Dwyer proposes a metric for word-of-mouth importance and investigates the impact that highly valued discourse has on involvement in a network context. He also offers a model of the relationship between involvement and the growth and decay of product-oriented online communities.

To begin, he validates the applicability of Google’s PageRank metric for determining the importance of websites to assessing the importance of community members and knowledge content. This measure (“adapted PageRank” or APR) is shown to be a better measure of value (i.e., knowledge and social capital) than the prevalent centrality-based metric that is based on the number of immediate ties.

Dwyer then demonstrates the superiority of the APR metric regarding preferential attachment, that is, whether people join a network by choosing people similar to them (homophily) or people who know more than they do (expert power). He demonstrates that expert power is the primary attraction between members. Content of high value to the community attracts attention with little reference to who originated the content.

He also quantifies and investigates the interplay between preferential attachment and decay in the social network and changes in community knowledge capital over time. Expert power, in whatever form is respected by the community, is the prime influence on how the knowledge network causes the social network to evolve. High-value content in the knowledge network explains 10% of social network growth.

Using the APR metric, companies can automate the process of filtering community message traffic to identify the information that attracted the most customer attention and the members who typically provided that information. Since high-quality content plays a significant role in increasing product involvement, companies that have products with large and active online communities should consider hosting a blog so they can play an active and visible role in injecting such content into their user community.

Included in the following collections:
MSI Reports 2006

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