Professor of Decision Sciences and Technology Management
V. (Paddy) Padmanabhan
Professor of Marketing
UGC; Content Contributors; VAR; Lifetime Value; Acquisition; Retention; C2C Marketplace; Network Effects; Q41112 ;
The success of any user-generated content (UGC) website depends crucially on its content contributors. How firms should invest in the acquisition and retention of content contributors represents a novel question that is particularly important for these websites.The authors develop a vector autoregressive (VAR) model to measure the financial values of the retention and acquisition of both content contributors and content consumers.In an empirical application to a C2C marketplace, the authors find that contributor (seller) acquisition has the largest financial value due to their strong network effects on content consumers (buyers) and other content contributors.However, the wearing-in of contributors’ financial values takes longer since the network effects take time to be fully realized.Simulation-based studies (i) shed light on the value implications of ‘enhancing network effects’, and (ii) quantify the revenue contributions of marketing newsletter campaigns. Our results indicate that enhancing network effects in complementary ways can further increase the marginal benefits of acquisition and retention.The authors also find that simply tracking click-throughs may vastly underestimate the values of marketing newsletters, in their case by more than a factor of five, which may lead to suboptimal marketing effort allocations.