Word-of-Blog for Movies: A Predictor and an Outcome of Box Office Revenue?

ABSTRACT Social media has become an important avenue of Word-of-mouth (WOM) and a recent study has found blogging to be an important lead-generation source among social media options. This article examines the dynamic interrelationship between word-of-blog volume and sales by using the movie industry as the research context. By employing the Granger Causality test and modeling the interrelationship through simultaneous equations, the results show that the volume of word-of-blog and box office revenue for movies provide significant causality and explanatory power for each other, supporting word-of-blog volume is both a predictor and an outcome of sales. The results also highlight for retailers the importance of strategically managing word-of-blog to influence consumer purchase decisions and generate revenue as well as the value of the findings for forecasting. Keywords: Word-of-Mouth; Word-of-Blog; Social media; Blogs; E-commerce (ProQuest: ... denotes formulae omitted.) 1. Introduction Word-of-Mouth (WOM) is usually believed to be a credible information source for consumers' purchase decisions [Bynerjee 1992; Brown & Reingen 1987]. The Internet and online communities have brought WOM to an even wider reach at a faster speed. For instance, online WOM can influence people's online purchase via buyers' subjective norm [Cha 2011; Suntompithug & Khamalah 2010] or via seller reputation [Saastamoinen 2009]. Online WOM can take many forms such as online reviews, discussion boards, video sites, blogs, microblogs, social networks, and so on. With the rapid increase in popularity of Web 2.0 technologies and the explosive growth of online social communities, social media, i.e. consumer-generated media and content, have emerged as new channels in which consumers interact and influence each other, as well as channels in which businesses and consumers interact and influence each other. Not only are a huge percentage of consumers and businesses online engaged in social media, but also a very large percentage of consumers discuss the brands and products they love or hate. Such social media are perceived to be transparent, inclusive, authentic, grassroots and consumer-driven [Baker 2009]. The unprecedented openness, velocity (speed) and volume of conversations produced by social media have made them become a vital avenue for transmitting WOM. David Meerman Scott [2008] claims the challenge to marketing "is to harness the amazing power of . . . whatever you call it - viral, buzz, word-of-mouse, or word-of-blog - having other people tell your story drives action. One person sends it to another, then that person sends it to yet another, and on and on." According to the Wikipedia entry for blog [http://en.wikipedia.org/wiki/Blog], "A blog (a contraction of the term "weblog") is a type of website, usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video. Entries are commonly displayed in reverse-chronological order." Based on a survey of 167 executives and business owners mostly from small and medium-sized businesses, a recent study [Walsh 2009] found blogging to be an important lead-generation source among social media options. Blogs have become pervasive and part of people's daily lives. For instance, Technorati [http://technorati.com] has indexed 133 million blog records since 2002. According to Technorati [2008], comScore MediaMetrix [http://www.comscore.com] in August 2008 reported there are 77.7 million unique blog visitors in the US among the total 188.9 million internet audience; eMarketer [http://www.emarketer.com] in May 2008 reported 22.6 million US bloggers in 2007 and 94.1 million US blog readers in 2007; Universal McCann [http://www.umww.com] in March 2008 reported 184 million WW have started a blog, 346 million WW read blogs, and 77% of active Internet users read blogs. In addition, this Technorati report indicated that "Four in five bloggers post brand or product reviews, with 37% posting them frequently. …