Three empirical studies on the impact of electronic word-of-mouth on digital microproducts

Abstract

Digital microproducts - such as Apple's 99-cents I-tunes songs or Amazon.com's 49- cents short books, or Disney's $4.99 short videos - are products in digital forms that can be delivered anywhere, at any time, at a low acquisition cost and no delivery costs. Since the selling price is small, fixed and identical to all products, it no longer plays an important role in the purchasing decision. As traditional micro-economic theory does not fully apply to these types of microproducts, an increasing body of research suggests that word-of-mouth has taken over price as the key demand factor. The purpose of this dissertation is to measure the impacts of electronic word-of-mouth (eWOM), as a signal of product reputation, brand reputation and reputation of complementary goods, on the microproduct buying decision. This dissertation consists of three empirical studies using digital short stores (Shorts) from Amazon.com and freeware downloads from Download.com. Shorts are condensed versions of books in PDF format sold for a fixed price of 49 cents. In this research, eWOM consists of product reviews and ratings posted on the Amazon.com e-book marketplace and the Download.com software marketplace. The first essay studies the impact of eWOM on sales performance of Amazon Shorts, and also maps the change in the predictive power of eWOM over time. The second study focuses on the impact of brand and complementary goods reputations, signaled by eWOM, on the likelihood of first and additional product eWOM being posted, as well as the likelihood of those additional eWOM significantly impacting sales. The third study looks at the impact of expert and amateur user reviews on demand for digital microproducts with zero cost, using freeware from Download.com. This dissertation makes several unique contributions to the growing body of research on eWOM, including a comprehensive and integrated study on the impact of eWOM as a signal of product reputation, brand reputation and complementary goods reputation. eWOM-based demand models for digital microproducts are also developed, and two longitudinal studies contribute to an understanding of the dynamic impact of eWOM over time. It also sheds new evidence on the interplay between reviews by critics and amateurs.