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The Economic Value of Online User Reviews with Ad Spending on Movie Box-Office Sales

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Abstract

Our objective in this paper is to assess the values of online user reviews for movies compared with the sales impact of post-release ad spending for movies. We use weekly box-office sales and ad spending data for 304 movies released in the U.S. along with online ratings and user characteristics from a social network site for movies. By exploiting the fixed-effects two-stage instrumental variable approach to account for movie heterogeneity and simultaneous relationships among user reviews, ad spending and sales, we found that improving the volume and valence of ratings can have the equivalent effect that ad spending can provide.

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Notes

  1. The expenditure only includes advertising on national broadcast and cable network television.

  2. Flixster.com had over 20 million unique users and about 2 billion user-generated movie reviews in 2008.

  3. We do not consider the first (or second) order lag of weekly ad spending or cumulative ad spending because its effect may still last in the current week.

  4. L is the lag operator and this is the Koyck (1954) transformation.

  5. AVG_NUMRA and AVG_PROFV are dropped due to their high correlations with AVG_NUMRE, 0.70 and 0.96 respectively.

  6. We also observe statistically significant relationship of this in our sample. From the first stage estimation for (2), all the variables of social network characteristics except for AVG_NUMF affect very significantly NUMRAT. We omitted the result table but it is available upon request.

  7. The results, omitted here for brevity, are available upon request from the authors.

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Authors and Affiliations

  1. Department of Business Information and Analytics, Daniels College of Business, University of Denver, Denver, CO, USA

    Young-Jin Lee, Kellie B. Keeling & Andrew Urbaczewski

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  1. Young-Jin Lee
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  2. Kellie B. Keeling
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Lee, YJ., Keeling, K.B. & Urbaczewski, A. The Economic Value of Online User Reviews with Ad Spending on Movie Box-Office Sales. Inf Syst Front 21, 829–844 (2019). https://doi.org/10.1007/s10796-017-9778-7

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