Capitalizing on the spirit of giving: seeding virtual gift purchases in online social networks

Abstract

Purpose Virtual gifts have emerged as a common feature of online communities, social gaming and social networks. This paper aims to examine how network-related variables and gift-seeding impact virtual gift sales. The network variables include gift-giver centrality and gift-giving dispersion, capturing, respectively, the relative importance of gift-givers in a network and their tendency to give gifts to a greater or lesser number of network peers. Gift-seeding tactics capture social network firms' attempts to stimulate virtual gift purchases by awarding virtual gifts to network members. Design/methodology/approach This study develops and estimates a fixed-effects panel data regression model to analyze virtual gift purchase data for a large social network service. Findings Gift-giver centrality, gift-giving dispersion and gift-seeding increase virtual gift purchases. Increases in consumers' receipt of seed gifts from social network firms ("direct seeding") and from other consumers ("indirect seeding") increases virtual gift purchases. However, the extent to which consumers give seed gifts to their friends in the social network ("seed mediation") does not affect sales. Greater gift-giver centrality amplifies (attenuates) the positive effects of direct (indirect) seeding. At greater levels of gift-giving dispersion, the effects of indirect seeding and seed mediation become negative. Furthermore, gift-seeding has spillover effects on virtual good (non-gift) purchases. Research limitations/implications This study's data, drawn from a South Korean social network service, offer unique and valuable social network information on actual virtual gift purchases and their seeding. Future research should replicate the results of the study outside the South Korean context. Practical implications Given the effects reported in this study, social network firms can facilitate the purchases of virtual gifts by improving the targeting of consumers in social networks and gift-seeding tactics. Originality/value This study uniquely examines the individual and interactive effects of network-related variables and gift-seeding on virtual gift sales. The study is seminal in its examination of how gift-seeding can be used as a marketing tactic to increase virtual gift purchases.