Using online conversations to study word-of-mouth communication

Managers are very interested in word-of-mouth communication because they believe that a product's success is related to the word of mouth that it generates. However, there are at least three significant challenges associated with measuring word of mouth. First, how does one gather the data? Because the information is exchanged in private conversations, direct observation traditionally has been difficult. Second, what aspect of these conversations 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 an outcome of past sales. Our primary objective is to address these challenges. As a context for our study, we have chosen new television (TV) shows during the 1999–2000 seasons. Our source of word-of-mouth conversations is Usenet, a collection of thousands of newsgroups with diverse topics. We find that online conversations may offer an easy and cost-effective opportunity to measure word of mouth. We show that a measure of the dispersion of conversations across communities has explanatory power in a dynamic model of TV ratings.