Abstract
Facebook, the leading social networking site, has opened its platform to developers and allow them to publishapplications. Subsequently, numerous Facebook applications of various types were designed and deployed.Despite a huge portion of applications without business context, there exist a substantially increasing number ofapplications tailored specifically for marketing and advertising. From a business perspective, a Facebookapplication possesses the advantages of low development costs and strong word-of-mouth effect, which providean ideal alternative to traditional advertising formats. This paper utilizes the well-known Bass model forforecasting product diffusion, and proposes its adaptation to produce an optimal promotion budget allocation forFacebook applications. For a given application promotional budget to be used over a fixed timeframe, the modeloffers a unique solution for allocating the funds between direct promotion and indirect promotion(word-of-mouth) in order to achieve a maximum percentage of user installations from the target population ofpotential users. Numerical examples are provided to illustrate the optimal solution and suggestions are made forfuture research necessary to validate the model for possible use by practitioners.
Highlights
1.1 BackgroundEstablished in 2004, Facebook has become the premier social networking platform
For a given application promotional budget to be used over a fixed timeframe, the model offers a unique solution for allocating the funds between direct promotion and indirect promotion in order to achieve a maximum percentage of user installations from the target population of potential users
A brief explanation of the Bass model is provided prior to illustrating how it is adapted to the diffusion process for Facebook applications in order to optimize the allocation of a promotional budget
Summary
Established in 2004, Facebook has become the premier social networking platform. A recent statistical report from Facebook claims that it has more than 800 million active users. Friends of the user get invitations from the user to install the application, or get curious about the application because of the mini-story feeds and install the application directly from the directory This viral aspect of Facebook applications, which is highly valued by online advertisers, can diffuse advertising messages using the application through the network of friends. This sharing behavior through social network links is essentially the main driver of promoting Facebook application installations. How this viral aspect is modeled as the imitation effect of the application diffusion process is discussed later
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