Social Learning and Diffusion of Pervasive Goods: An Empirical Study of an African App Store
This study addresses how social influence affects app adoption for app store operators, but it is incremental as it applies existing models to a new context.
The authors tackled the problem of quantifying social influence on mobile app choices in an African app store, finding that offline density of adopters explains choices better than online density and that ignoring social influence leads to biased estimates, with a counterfactual analysis showing a potential 13.6% revenue increase from viral marketing.
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).