Social Learning and Diffusion of Pervasive Goods: An Empirical Study of an African App Store

TL;DR

This paper empirically examines how social influence affects mobile app adoption in an African app store, revealing offline influence is more significant and that ignoring social effects biases customer choice estimates.

Contribution

It develops a combined macro-micro diffusion model with Bayesian estimation to quantify social influence on app choices, highlighting its importance for accurate modeling.

Findings

Offline density of adopters influences choices more than online density.

Ignoring social influence biases customer choice estimates.

Viral marketing can boost app store revenue by 13.6%.

Abstract

In this study, the authors develop a structural model that combines a macro diffusion model with a micro choice model to control for the effect of social influence on the mobile app choices of customers over app stores. Social influence refers to the density of adopters within the proximity of other customers. Using a large data set from an African app store and Bayesian estimation methods, the authors quantify the effect of social influence and investigate the impact of ignoring this process in estimating customer choices. The findings show that customer choices in the app store are explained better by offline than online density of adopters and that ignoring social influence in estimations results in biased estimates. Furthermore, the findings show that the mobile app adoption process is similar to adoption of music CDs, among all other classic economy goods. A counterfactual analysis shows that the app store can increase its revenue by 13.6% through a viral marketing policy (e.g., a sharing with friends and family button).