The question is “how to increase revenue with the help of social networks?”. Or to cite the title of a Harvard Business School paper: “Do friends within a social network influence online buying behaviors of others in the group?”
The answer: Forget banners – make presents to the users!
Studies show that the click-through rate of ads on social networking sites is extremely low—simply because people don’t go to these sites to seek information about specific products. Therefore, the advertising-based business model has had only limited success on social networking sites.
If the purpose of advertising is to influence consumers’ purchases, our research shows that there is another way to influence their behavior. Imagine that Sony wants to promote its new digital camera. Sony can either advertise on Facebook and accept a very low click-through rate, or give away free cameras to several Facebook members (potentially at a lower cost than advertising) and generate a viral campaign. Our research shows that this viral campaign is possible.
Sunil Gupta, Edward W. Carter Professor of Business Administration at Harvard Business School
