Word of Mouth on the Internet
Word of Mouth or Viral Marketing on the Internet
The email company Hotmail was able to amass 12 million users one and a half years after its launch. This was more than any other mail company at the time. Without much money to spend on advertising, as most of it had gone to hardware and R&D, the advertising team resorted to placing a hyperlink with the message “Get your free e-mail at Hotmail,” at the bottom of every sent message. Instead of being repelled by the advertising as the founders imagined users would be, Hotmail’s number of users experienced the fastest growth rate of any company during 1997.
The article on “Applying Quantitative Marketing Techniques to the Internet” explores the topic of viral marketing and how it gained its place on the internet. Author Alan L. Montgomery begins his paper with the statement that viral marking isn’t a “creation of the internet”. Before the internet such advertising would be referred to as “word of mouth” or “diffusion of innovation”. He presents an equation (a diffusion model) that relates the amount of people that haven’t adopted a product to the total number of people willing to adopt the product. The equation incorporates such parameters as market potential, advertising, and word of mouth. These parameters are inferred statistically and are claimed by Mr. Montgomery to provide accurate predictions of adoption rates.
The reason word-of-mouth advertising works so well on the internet is that specific niches can be served while communication between individuals is free and frequent. This allows for the diffusion process to take hold quickly. In class we have recently explored such topics as network cascades and the network effects. This article doesn’t focus so much on the customer’s decision to adopt or reject a technology, but ability and ease of the customer’s choice to travel across a network of potential adopters.
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http://www.jstor.org/stable/25062671?seq=3