The Networking Payoff

Ties on online social networks can help create more content — and ad revenue.
January 30, 2013 | Research Feature
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As Facebook users check for friends’ latest updates, they’re also exposed to the advertisements that the social networking site pulls into their feeds. How effective is this? How can social networking sites encourage users to click on ads for new products — and increase revenue along the way?

Ad content targeted at individual users through their social media feeds depends heavily on their engagement, which can be measured in part by the amount of content they create. New research from Professor Scott Shriver, along with Harikesh Nair of Stanford University and Reto Hofstetter of the University of St. Gallen in Switzerland, investigates whether that relationship is coincidental or causal. The researchers examined the history of social tie formation and content creation on Soulrider, an online community of Swiss windsurfers, leveraging the fact that its users often post about wind speeds at their preferred surfing locations.

After merging the Soulrider data with wind speed information from the Swiss meteorological office, the researchers were able to establish that surfing-friendly wind speeds led to more user-generated content about surfing sessions. The researchers used this independent source of variation to isolate the effect that content production has on forming ties (“friendship” links) on the social network. Using data on the social network structure, the team was also able to establish the reverse effect, that greater connectivity in the network prompts more content generation. Identifying these causal links is a step forward from past research, which merely found a correlation between posting content and increased connections.

In broader terms, Shriver and his fellow researchers found that more connected users visit and browse the site more often, which helps stimulate online revenue growth. In other words, together connections and content led to a self-reinforcing virtuous cycle that could help sustain the growth of the site.

“One of the main issues sites like Facebook deal with is how to monetize the content created on their sites,” Shriver says, “This research reinforces the idea that online social networks can drive advertising revenue by encouraging dense social ties.”

This suggests that online social networks should offer users incentives to connect with friends in order to maintain network and revenue growth. Offering engagement tools that lead to content generation, such as facilitating tie-formation activities like “friending” and enabling comments and photo tagging, will help increase user interaction on networking sites. This type of organic content is preferable to paying users to generate artificial content, which runs the risk of reading as inauthentic, potentially alienating users. Smaller social networking sites, like Soulrider, could take a cue from the engagement efforts of sites like Facebook and Twitter, each of which ask users to add connections (“friend” or “follow,” respectively) as soon as they sign up and provide a constant stream of suggestions and prompts for users to connect with other users or businesses.

Shriver’s study data also shows that 80 percent of Soulrider’s content was generated by 10 percent of users, offering an additional way for sites to encourage stronger relationships and ad revenue. “Targeting engagement efforts specifically toward the preferences and habits of the most productive users in this 10-percent group may be a more viable way of generating additional page views, increasing click-through rates, and thereby boosting ad revenues.”

This is just one way for networking sites to capitalize on this research, deepen connections between users, and increase advertising profits. “It’s not sufficient to just get people to join the site,” Shriver says. “Increasing the strength of the relationships is key to increasing page views — and, in turn, ad revenue.”

Scott Shriver is an assistant professor of marketing at Columbia Business School.

Scott Shriver

Professor Shriver is an empirical researcher who utilizes microeconomic and industrial organization theory to build econometric models of supply and demand. His research focuses on problems involving technology adoption, network effects, market entry and strategic competition. His recent papers have investigated the role of network effects in consumer/retailer adoption of alternative motor fuels and the relationship between content production and link formation in...

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Scott Shriver, Harikesh Nair, Reto Hofstetter

"Social Ties and User-Generated Content: Evidence from an Online Social Network"


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