Using online conversations to study word of mouth communication

Managers are very interested in word-of-mouth communication because it can have a tremendous impact on a product's sales. However, there are at least three significant challenges associated with measuring word of mouth. It is our primary objectives in this paper to address these challenges. First and foremost, how does one even gather the data? Since the information is exchanged in private conservations, direct observation is or at least has traditionally been quite difficult. Second, even if one could observe the conservations, what aspect of them should one measure? The third challenge comes from the fact that word of mouth is not exogenous. While the mapping from word of mouth to future sales is of great interest to the firm, we must also recognize that word of mouth is at the same time n outcome of past sales. Our core result is that on-line conversations may offer an easy and cost-effective opportunity to measure word-of-mouth. However, simply counting on-line conversations may not be informative. On the other hand, measuring the "dispersion" of these conversations across communities is. Specifically, we showthat a measure of dispersion has explanatory power in a dynamic model of sales, while pure counts do not. As a context for our study, we have chosen new TV shows during the 1999/2000 seasons. Our source of word-of-mouth conversations is Usenet, a collection of thousands of new groups with very diverse topics.