Do Movie Reviews Affect the Box Office Revenues?

April 24, 2015 annisadhantri Leave a comment

The existence of Internet has changed our way of living. It has been a huge part of our life, one we simply cannot live without. We rely on it in almost every aspect of our lives, including when we seek for information. This also applies when we’re deciding what movies to watch. Before go to the cinema and watch a particular movie, some people usually checked the movie’s online reviews first. These movies’ reviews are online user reviews, and it is a form of electronic word-of-mouth (eWOM). According to Duan, Gu, and Whinston (2008), eWOM influences consumer purchase behaviour while it’s also the outcome of consumer purchases. But then, how these online user reviews actually impact the offline purchase?

There are three measures of online user reviews, the volume (Liu 2006, Duan et al. 2008), the valence or the average (Liu 2006, Duan et al. 2008, Chevalier and Mayzlin 2006), and the variance in reviews (Godes and Mayzlin 2004). Chintagunta, Gopinath and Venkataraman (2010) measured the impact (valence, volume, and variance) of national online user reviews on designated market area (DMA)-level local geographic box office performance of movies in the United States. What’s different about their study is they used local geographic data instead of national-level data (used by previous studies) and the ‘when’ and ‘where’ a movie is released are taken into account. Thus, they measured user reviews when a movie was released in a market and those were written by users where the movie was previously released. The impact was measured by combining data from daily box office ticket sales on 148 movies released from November 2003 to February 2005 with user ratings from the Yahoo! Movies website. They found that the overall movie revenues is greatly affected by the opening day gross. As it was conducted on DMA, movie and market fixed effects were included thus taking into account their differences including movie genre and market size, and some other variables was also controlled such as advertising level and number of theaters. In their first study, using the local data, they found that the average user ratings influenced the box office performance the most. This finding is interesting since most previous studies found that it is the volume of reviews which matters the most to box office revenues. But when the national-level data was used, they arrived at the same results as previous studies. And at the last part of the study, they attempted to explain these results difference by using national-level models with market-level controls. This method gave the same result as the first study, the average of user ratings has the greatest impact on the box office revenues. It concluded that it is important to determine where the movie was played, whether on “new markets” or “old markets”, and only then the “true” effect of user ratings can be measured.

As for us the movie goers, what the paper discovered is that we’re mostly affected by the average of ratings in deciding what movies to watch. Yet, how many people rated the movies (volume) is also an important aspect, as I would believe a slightly lower rating with much higher volume rather than a higher rating with much lower volume. In other words, volume and variance make a rating/review more trustworthy. Which one would you prefer?

Source : IMDB

References

Chevalier, J. A., and Mayzlin, D. 2006. ‘The effect of word of mouth on sales: Online book reviews.’ Journal of Marketing Research, 43(3), 345-354.

Chintagunta, P.K., Gopinath, S. and Venkataraman S. (2010). ‘The effects of online user reviews on movie box office performance: Accounting for sequential rollout and aggregation across local markets.’ Marketing Science, 29(5), 944–957.

Duan, W., Gu, B., and Whinston, A.B. (2008), ‘The Dynamics of Online Word-of-Mouth and Product Sales — An Empirical Investigation of the Movie Industry,’ Journal of Retailing, 84(2) 233-242.

Godes, D., and Mayzlin, D. 2004. ‘Using online conversations to study word-of-mouth communication.’ Marketing Science, 23(4), 545–560.

Liu, Y. 2006. ‘Word of mouth for movies: Its dynamics and impact on box office revenue.’ J. Marketing, 70(3), 74-89.

Business Case

Facebook ads are going to change!

April 24, 2015 343924mb Leave a comment

Facebook has struggled with how to get e-commerce working on their platform. Facebook users are spending hours a day on Facebook, but somehow the users aren’t in the right mindset to shop while spending time on the social network. But change is coming, since last month, since Facebook has acquired TheFind.

What is TheFind?

In short TheFind was an e-commerce shopping search engine providing a multichannel environment to personalize the shopping experience. (Crunchbase, 2015) Crunchbase explained them in a more extended way:

TheFind applies patented ecommerce technology to make the consumer shopping experience easy, efficient and fun. TheFind’s powerful shopping search works across the Web looking through every store to quickly find you the best deal and even that hard-to-find item. Uniquely personalized just for you, TheFind continuously learns your taste and style from your activity, likes and purchases, showing you more from your favorite stores and brands. Finally, TheFind organizes all your shopping activity to quickly see what you’ve been looking for and what you’ve bought, and automatically tracks your shipments, returns and receipt. (Crunchbase, 2015)

So which capabilities are so interesting for Facebook?

Since Facebook acquired TheFind, the site went offline with the message that they want to use all their capabilities for Facebook. But how did the TheFind exactly work and which capabilities are so important for Facebook?

– Product feed technology: Merchants could verify their sites on TheFind’s merchant center and upload a product feed on a regular basis for free. Many e-commerce platforms include the ability to automatically submit feeds to TheFind and the company partnered with affiliate networks.

– Product search engine: Feed management is just one side of the story. TheFind referred to itself as a shopping search engine. It not only could take structured feed data, it crawled marketplaces.

– Personalized recommendations driven by Facebook integration: TheFind started working with Facebook back in 2010 when it enabled users to see what products have Facebook likes by logging in with their Facebook credentials. They provided “Discovery by Likes” for users that sign into Facebook.

– Local results: This data is potentially huge for Facebook! Over 90 percent of transactions still happen in physical retail locations. When users search on TheFind, they can click on the local results tab (on both mobile and desktop) to find a map of nearby retailers that carry the products. Clicking on a retailer’s name on the map brings up the local inventory along with the phone number, address and distance from the user.

Facebook’s new advertising possibilities

Social affinities, location targeting and products shown based on past behavior are all possible with what Facebook gets from TheFind. Consumers could start seeing ads in their News Feeds from nearby stores for products based on what they liked on Facebook and around the web, what their friends liked, or with Look Alike audiences what others with similar profiles and social affinities liked. Facebook could keep the coupon and even the price-matching functionality used to tie an ad back to in-store purchases. At the end Facebooks hopes you are going to shop on their social network in the future, because of the even more personalized ads powered by former employees and data of TheFind.

References

– https://www.crunchbase.com/organization/thefind#sthash.pAP1eYBX.dpuf, 2015
– https://www.crunchbase.com/organization/thefind, 2015
– http://marketingland.com/thefind-tells-partners-new-focus-is-all-about-facebook-product-ads-122800, 2015
– http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_Facebook, 2015

Articles

Does Chatter Really Matter?

April 24, 2015 356050lo Leave a comment

Let’s say you are planning to buy a new HP laptop. You have spent quite some time comparing laptops online and you have found that the HP Pavilion 17-f240nd perfectly matches your needs. The reviews that you have read seemed truthful and you have a feeling that you will be satisfied with your new laptop. You are glad to know how other consumers experience the HP Pavilion and what they all use it for. The internet with its online product reviews and ratings have made your life so much easier! After you have used your new HP you might even contribute a review, as you want others to know how you feel about the product. Even when you are dissatisfied with it, you might write a review as you want to prevent others from buying it. Clearly, product reviews can help consumers in making decisions and thus affect firm sales. However, are these product reviews also related to other important performance metrics of the firm?

Tirunillai and Tellis (2012) studied the relationship between user-generated content (UGC) and stock market performance of the firm. They examined product reviews and ratings (chatter) because these are rich in product-related information. Consumers frequently post videos or blogs about certain products, however these often contain too much information which is not always relevant to a specific product. Tirunillai and Tellis (2012) argued that the signal-to-noise ratio is too low in these types of UGC and is therefore not taken into consideration in their research. Various markets were taken into account over a period of four years (from June 2005 to January 2010). These markets range from personal computer and data storage, to toys and footwear. Among other, consumer reviews for HP, SanDisk, Mattel, and Nike were examined.

To start with, they found that most of the online chatter was positive. This result was found across all markets with an average of 75% of chatter being positive. Moreover, the volume of both positive and negative chatter showed an upward trend. This is beneficial for firms and investors, because the other findings show that the volume UGC predicts abnormal returns and increases in trading volume on the short-term as well as on the long-term. However, negative chatter has a significant negative effect on returns, whereas positive UGC has no significant effect on returns. Offline television advertising can be used to increase to volume of chatter and decrease negative chatter at the same time. Lastly, negative consumer chatter increases idiosyncratic risk, which is asset specific risk that is not correlated to market risk. Logically, firms should keep this risk at a minimum in order to not discourage investors.

The previous results are important for investors and managers. Investors that experience information asymmetry should turn to UGC in order to find more information about the firm’s performance. UGC often includes information that is not (yet) widely known and more importantly, when UGC includes a lot of negative chatter, investors should now know they should not invest in this particular firm. For managers it is important that they trace the negative chatter and take corrective action as soon as possible, in order to prevent losses in shareholder value. For instance, to counter negative chatter about a product, the firm can start broadcasting television ads. Based on the study and our own experience, we can conclude that consumer chatter is not only informative for other consumers, but also for firms and investors.

Source:

Tirunillai, S., & Tellis, G. J. (2012). Does chatter really matter? Dynamics of user-generated content and stock performance. Marketing Science, 31(2), 198-215.

Articles

Complete hassle-free shipping for 5 dollars : Shyp.com

April 24, 2015 annedegroot123 Leave a comment

‘Shipping isn’t easy. No matter who you are – an individual or a business – you’d like to spend less time and less money on sending things to anyone in the world’

– Shyp.com, 2015

This is the value proposition of Shyp in a nutshell. Shyp is an app available for android and iOS, that changes the way you ship your products. Currently, you have to make sure you have the right wrapping products and boxes to package your product correctly. Next, you have to go to a postal office to send your product, where you sometimes have to wait in line for a long time. With Shyp, this is all history. Shyp works in two easy steps:

Snap a photo with your phone
Request a pickup

(Google Play, 2015)

Based on the photo you upload in Shyp, Shyp determines the correct packaging materials to ship your products, and takes care of wrapping the product for you (Shyp.com, 2015). After requesting a pick up, a courier from Shyp will come to pick up your product, and he / she will transport it to a Shyp warehouse. There, your item will be packaged. Next, Shyp will determine which post carrier is cheapest for your package, and will make sure your package is delivered to the chosen service (New York Times, 2014).

Shyp.com promises their customers low costs: ‘We price compare across all major shipping carriers to give you the lowest rate possible.’ Additionally, customers of Shyp pay a 5 dollar fee on top of the shipping charge. Therefore the consumer payoff of Shyp can be formulated as follows: The utility is high since the customer will spend less time and effort on shipping their product (as compared to traditional methods), and on the other hand the consumer pays five dollars for Shyp’s service on top of the shipping charge (and the shipping charge might turn out lower as Shyp compares all carriers for you).

I turn to the institutional arrangements in place at Shyp. Having a bad experience with Kiala.com, I always check the liability of the shipping company I use. Besides obvious terms of service (e.g. including not shipping illegal products and live animals), Shyp includes a clause about reimbursement. According to this clause, ‘Shyp will reimburse you for actual loss of or damage to any shipment whil in Shyp’s possession up to a maximum of $1,000 per shipment or, if less, the maximum amount permitted by applicable law or regulation.’

When reviewing the ratings of Shyp, I find that the crowd seems to be positive: 39/55 ratings are five stars:

(Google Play, 2015)

To conclude: Shyp has an interesting proposition. Current customers seem to be happy with its service. Time will tell if enough customers are happy with the consumer payoff to make this business successful. Hopefully Shyp.com will continue to expand, so we can try it ourselves and make up if we want to pay 5 dollars to have a hassle free shipment.

References:

– Google Play (2015), last accessed 24-04-2015 https://play.google.com/store/apps/details?id=com.shyp

– New York Times (2014), ‘Painless shipping in a few easy steps’ by Farhad Manjoo, Last accessed 24-04-2015, http://www.nytimes.com/2014/05/22/technology/personaltech/use-an-app-pay-a-fee-and-ship-almost-anything.html?_r=0

– Shyp.com (2015), last accessed 24-04-2015, http://www.shyp.com/