Understanding the Dynamic Interplay of Social Buzz and Contribution Behavior within and between Online Platforms – Evidence from Crowdfunding

Motivated by the growing interconnection between online platforms, we examine the dynamic interplay between social buzz and contribution behavior in the crowdfunding context. Since the utility of crowdfunding projects is usually difficult to ascertain, prospective backers draw on quality signals, such as social buzz and prior-contribution behavior, to make their funding decisions. We employ the panel vector autoregression (PVAR) methodology to investigate both intra- and cross-platform effects based on data collected from three platforms: Indiegogo, one of the largest crowdfunding platforms on the web, Twitter and Facebook. Our results show a positive influence of social buzz on project backing, but a negative relationship in the reverse direction. Furthermore, we observe strong positive feedback cycles within each platform. Our results are supplemented by split-sample analyses for project orientation (Social, Cause and Entrepreneurial) and project success (Winners vs. Losers), in which Facebook shares were identified as a critical success factor

Crowdfunding: Platform Dynamics under Asymmetric Information

Platform ecosystems are a growing trend in various industries and many companies that rely on this organizational structure have seen unprecedented growth rates in recent years. Compared to traditional service providers, platforms do not offer products or services directly to their customers, but almost exclusively through complementors who develop and deliver complementary content. Platforms therefore create value by enabling and coordinating interactions between the demand and the supply side. As these platforms are two-sided markets, they are characterized by distinct cross-side network effects, meaning that each side of the market derives externalities from the participation of the respective other group. Crowdfunding platforms rely on this concept and facilitate transactions between individuals who seek funding for a specific project or venture and prospective investors. Crowdfunding platforms are, however, special as the transactions made via the platforms are particularly risky for end-users because of a high level of information asymmetry existing between the market sides. Though a certain level of information asymmetry exists between the distinct market sides in every two-sided market, a number of factors amplify this problem in the crowdfunding context. For instance, there is usually little to no publicly available information such as customer reviews to evaluate the investments ex-ante. The creators of crowdfunding campaigns are therefore able to overstate quality or withhold information as they control the flow of information towards potential investors. Furthermore, many of the projects that are published on crowdfunding platforms are still in their infancy, making it difficult to accurately predict project outcomes. Compared to other types of two-sided markets, the issue of information asymmetry is also more difficult to resolve in crowdfunding because mechanisms such as reputation systems that are frequently applied in other contexts to mitigate this issue are less relevant on crowdfunding platforms. The actual utility of crowdfunding projects is therefore difficult to ascertain at the time the investment decision has to be made and dynamics of crowdfunding are thus different from those in other platform settings. Many open questions still remain with respect to the optimal market design of crowdfunding platforms in order to mitigate information asymmetries. Against this backdrop, four research studies have been conducted to investigate how the behaviors and actions of the distinct groups of market participants (i.e., platform provider, project creators, backers) influence the decision-making of potential backers on crowdfunding platforms. The first study is concerned with the effects actions taken by platform providers can have for the decision-making of backers. More specifically, it is examined how relaxing the input control for crowdfunding projects on Kickstarter affected the decision-making of backers. The second and third study are concerned with the role of social buzz and contribution behavior by previous backers. While the second study is focused on the dynamic interplay of social buzz, prior-contribution behavior, and the respective effects on backer decision-making, the third study describes the repercussions of non-genuine social media likes for project creators. The final study is focused on the influence project creators can have on backers by signaling certain personality traits through their project description and video. Overall, this thesis highlights that, as a result of the high level of information asymmetry on crowdfunding platforms, prospective backers seek alternative information and signals to use for decision support in the face of uncertainty. Platform providers and project creators may use the results to better understand how and why certain actions or behaviors of market participants on crowdfunding platforms affect the decision-making of prospective backers. The findings may therefore help platform providers to optimize the market design of crowdfunding platforms in order to avoid information-related market failure in the long term

El impacto de los medios sociales y del e-WOM en el éxito de las campañas de crowdfunding basadas en recompensas

[EN] Crowdfunding (CF) is a financial tool that has faced an impressive growth over the past few years, and provides an alternative form of fundraising entrepreneurial projects. However, not all CF campaigns are successful in attracting the investors’ interest and obtaining the pledging goal. As CF is built over internet platforms, digital marketing strategies have been used to improve awareness and engage people to contribute with small amounts of money for a given CF campaign. Hence, this paper intends to study the effect of social media and electronic word of mouth (e-WOM) on the CF campaigns’ outcomes and whether these digital marketing strategies might influence the small investors’ decision to support or not a reward-based CF campaign. Using a sample of data from the second largest American reward-based CF platform (Indiegogo), we have applied the multiple OLS regression analysis, to assess the causal effect of various sets of variables in the success rate of a CF campaign. The findings show that social media and e-WOM strategies play a critical role and have a positive significant impact on a CF campaign.[ES] El Crowdfunding (CF) es un instrumento financiero que ha experimentado un crecimiento impresionante en los últimos años y ofrece una forma alternativa de captación de fondos para proyectos empresariales. Sin embargo, no todas las campañas de CF logran atraer la atención de los inversores y obtener el objetivo inicial de la campaña. Dado que las campañas de CF se construyen sobre plataformas de Internet, se han utilizado estrategias de comercialización digital para mejorar la concienciación y lograr que las personas contribuyan con pequeñas cantidades de dinero a una determinada campaña de CF. Por lo tanto, este documento tiene por objeto estudiar el efecto de los medios sociales y del boca a boca electrónico (e-WOM) en los resultados de las campañas de CF y si estas estrategias de comercialización digital podrían influir en la decisión de los pequeños inversores de apoyar o no una campaña de CF basada en la recompensa. Utilizando una muestra de datos de la segunda mayor plataforma americana de CF basada en la recompensa (Indiegogo), hemos aplicado el análisis de regresión de mínimos cuadrados ordinarios múltiples, para evaluar el efecto causal de varios conjuntos de variables en la tasa de éxito de una campaña de CF. Los resultados muestran que los medios sociales y las estrategias de e-WOM desempeñan un papel fundamental y tienen un impacto significativo positivo en una campaña de CF

Please Share! Online Word of Mouth and Charitable Crowdfunding

During the last few years, charitable crowdfunding has become an increasingly popular method of online fundraising for personal and charitable causes. Many such crowdfunding platforms encourage and facilitate the use of online word of mouth (WOM) through social networks and social media, to spread the word about the crowdfunding campaigns. While online WOM is commonly used to share information about crowdfunding campaigns, there is hitherto limited understanding as to whether or how this information sharing affect individuals’ contribution behavior or the outcome of crowdfunding campaigns. In this study, using a unique dataset from 590 crowdfunding campaigns observed over 12 days, we examine to what extent, and how quickly online WOM affect the rate of contributions. In addition, we explore the effect of different phases of fundraising (over time or as they approach their target goals) and of the coverage of the campaigns in major online news websites

Electronic Word-of-Mouth and the Crowdfunding Environment: A Store Environment Approach to Crowdfunding Success

Crowdfunding has transformed the new venture financing process by expanding the possibilities for not only who can receive funding but also who can become a funder in new venture projects. Rewards-based crowdfunding platforms such as Indiegogo.com offer individuals a “reward” in return for their contribution. The rewards-based crowdfunding environment is imbued with aspects of both new venture funding and internet-based consumer purchasing. A funder may hope to obtain a valued commodity in return for their contribution to a crowdfunding project. Yet, the uncertainty associated with the outcomes requires the funder to infer quality by considering the viability of the project plan and the abilities of the project team. Building upon the complementary perspectives of a rewards-based crowdfunding contribution as both an investment and a purchase, I use the store environment model from the consumer behavior literature as a lens for identifying the informational cues project teams use to convey the worth of their project to funders. Since crowdfunding relies on the interaction of the community, I draw from research on electronic word-of-mouth (eWoM) and social media to understand how social media “buzz” can act as a social cue within the crowdfunding environment, transforming the nature of the message conveyed by the project team. My findings indicate that crowdfunding environment does impact the total amount received for a project, alone and in tandem. More importantly, the type of cue matters; design cues (vividness and structuredness) work best when combined with other design cues and social cues (project team cues and social media “buzz”) work best with other social cues. First, vividness matters –particularly when combined with a well-structured text. Next, neither project team attributes not community discourse matter in isolation, but in combination they do. Finally, too much social media “buzz” has a negative effect on funding, particularly later in the campaign. My research presents the store environment model as a valuable lens for understanding crowdfunding outcomes. By illuminating the complementarities between the new venture financing and internet-based consumer purchasing perspectives of crowdfunding, I utilize a more comprehensive application of the store environment model than has been employed in online contexts previously and present social media eWoM (i.e. social media “buzz”) as a social cue having a significant impact in online store environments and the rewards-based crowdfunding environment in particular. I also highlight the importance of eWoM, in the form of social media “buzz,” as an indirect force on organizational outcomes, acting in tandem with other environment cues and differentially over time

ŠTO POKREĆE USPJEH KAMPANJA SKUPNOG FINANCIRANJA TEMELJENOG NA NAGRADI?

While the crowdfunding phenomenon has attracted considerable practitioner and scholarly attention, existing research does not allow us to fully understand the determinants of crowdfunding campaigns performance. Th is is a key question within crowdfunding research to date. Using the most popular crowdfunding platform in Portugal (PPL crowdfunding), we constructed a data set to capture campaign characteristics and funding outcomes. We focused on 347 PPL campaigns initiated and ended in 2017 to test our hypotheses. Data were compiled from campaign descriptions and fi nal result appearing on the PPL platform. Th is platform uses a rewards-based model where founders receive tangible, nonmonetary rewards for their contributions, oft en in the form of products /services, or tokens of appreciation such as thank you notes. Using a binary logistic regression model this paper investigates the factors driving a campaign’s success. Such factors include project goal (euros), duration of campaign, Facebook shares, geographic distance, project comments, communication quality, type of founders and number of backers. Th e dependent variable is a dichotomous variable (0/1) that indicates whether a project has received the full target amount. We use this success indicator to assess whether projects that received full funding generally diff er signifi cantly from projects that did not. Our results highlight the importance of some variables related to the project and the role of social networks on funding success rewards-based crowdfunding. Th ese conclusions off er new insights into the dynamics of rewards-based crowdfunding.Iako je fenomen skupnog financiranja privukao priličnu pozornost praktičara i znanstvenika, postojeća istraživanja ne omogućuju potpuno razumijevanje odrednica uspješnosti kampanja skupnog financirana. To je ključno pitanje u dosadašnjem istraživanju o skupnom financiranju. Koristeći se najpopularnijim platformama za skupno financiranje u Portugalu (PPL crowdfunding) izradili smo set podataka koji obuhvaća karakteristike kampanja i ishode financiranja. Kako bismo testirali hipoteze, usredotočili smo se na 357 PPL kampanja koje su započele i završile u 2017. Podaci su prikupljeni iz opisa kampanja te konačnih rezultata koji su objavljeni na PPL platformi. Ta platforma upotrebljava model temeljen na nagradi u kojem osnivači primaju opipljive, nenovčane nagrade za svoje doprinose, često u obliku proizvoda/usluga ili znakova pažnje poput zahvalnica. U ovom se radu istražuju čimbenici koji pokreću uspjeh kampanje, i to koristeći se modelom binarne logističke regresije. Čimbenici uključuju cilj projekta (u eurima), trajanje kampanje, broj dijeljenja na Facebooku, zemljopisnu udaljenost, komentare projekta, kvalitetu komunikacije, vrste osnivača i broj podupiratelja. Zavisna varijabla je dihotomna varijabla (0/1) koja pokazuje je li projekt prikupio puni ciljani iznos. Koristimo ovaj pokazatelj uspjeha kako bismo procijenili razlikuju li se u značajnoj mjeri projekti koji su primili puni iznos financiranja od projekata koji nisu. Naši rezultati naglašavaju važnost određenih varijabli povezanih s projektom i ulogu društvenih mreža za uspjeh skupnog financiranja temeljenog na nagradi. Zaključci nude novi uvid u dinamiku skupnog financiranja temeljenog na nagradi

Crowdfunding: the moderating role of the funding goal on factors influencing project success

Purpose: The factors determining the success of crowdfunding projects is one of the central aspects for crowdfunding researchers. Most quantitative approaches recognize the amount of funds targeted as an important control. However, little is known about the impact of the funding goal on other factors that impact crowdfunding success. We hypothesize that the effect of crowdfunding success factors might vary dependent on funding goal level. Design/methodology/approach: A dataset of 338 crowdfunding projects on the German crowdfunding platform StartNext, with a vast majority of projects founded in Germany and a few projects from international European founders, in the years 2015 to 2016 is analysed by conducting regression analyses controlling for varying funding goal sizes. We use the dependent variables success, the degree of success, number of project supporters and the average contribution per supporter and control whether the effect of independent variables such as comments, updates and social media depend on different funding goals. Findings: Our study indicates that the impact of the investigated success factors in fact strongly depends on the goal sizes of crowdfunding projects. By grouping projects into clusters of varying funding goal sizes, we find that the impact of individual success factors changes and that the funding goal plays a moderating role for factors impacting project success. Research/practical implications: These results help both researchers and future entrepreneurs to better understand supporter behaviour. First, we suggest researchers to include the projects’ funding goals as moderators in most cases especially when assessing success factors for crowdfunding projects. Second, future entrepreneurs should be aware that factors influencing the success of a crowdfunding project strongly depend on the set funding goal. Depending on funding goal, some factors become less relevant whilst other factors’ importance is increasing. Originality/value: The funding goal of a crowdfunding project determines whether instruments used by project founders have an impact on their project’s success. Although the funding goal is a central issue in crowdfunding research, it is often used as independent variable, in contrast we suggest incorporating it as a moderator for other success factors

Dynamics in Platform Ecosystems

Platform business models are gaining rapid traction in today’s world. As of 2016, the four most valuable companies—Apple, Google, Amazon and Microsoft—have been using this business model. So do some of the most promising start-ups, including Uber and AirBnB. These providers of multi-sided platforms have a common goal, which is to match producers and consumers in order to create value through their interactions. The evolving ecosystems around a platform business are characterized by network effects among the groups of stakeholders, as each market side is influenced by the other side of the platform. A goal of the platform owner is to create and exploit as many monetization opportunities as possible. As the main revenue source, usually, is based on the interactions on or access to the platform, managing the demand and the supply side is at the core of platform management. One example of an uprising area of business that leverages a platform business model is crowdfunding platforms. These multi-sided markets try to facilitate the interaction of individuals who seek funding for a specific project, with a crowd of people that is willing to invest in the idea. The idea behind the model has been around for a long time, but due to reduced transaction cost is now available on a global scale. As of November 2016, Kickstarter, one of the most famous players in the business of reward-based crowdfunding, has already raised 2.7 billion USD in total pledges and has funded over 114,000 projects. This dissertation tries to shed light on the dynamics that are at work in a platform ecosystem by investigating distinct behaviors of platform participants and observing the impact on other stakeholders and the platform ecosystem as a whole. Each of the papers included in this dissertation focuses on a certain participant or dynamic of the platform ecosystem. With the first article, the theoretical basis of asymmetric information between consumers and producers in a crowdfunding environment is established. Furthermore, it shows that the opinion expressed in the form of electronic Word-of-Mouth (eWOM) and the observable popularity information (e.g. decision-making of other participants) serve as credible quality signals, subsequently influencing consumers’ decision-making. Also, popularity information and eWOM differ significantly in terms of effectiveness over time. Both factors, eWOM and popularity information, can therefore be seen as means to reduce information asymmetries in platform ecosystems. Since the importance of popularity information and eWOM is known to producers, an incentive to manipulate these performance indicators can be deducted. We therefore suspected that producers might establish non-genuine indicators of eWOM or popularity information. Article 2 then identifies a manipulation strategy of project creators on Kickstarter, who illegally alter the number of Facebook Shares their campaign supposedly has. After identifying the fraudulent campaigns, we were able to observe the resulting effects of non-genuine social information on consumer decision-making over time, showing that a short-term gain can be achieved, whereas the total effect is indeed harmful to the campaign. Contrary to the deliberately fake social information sent by the producers, the third article then concerns non-explicit campaign characteristics in the form of personality traits of producers. Here we were able to extract the Big Five personality traits of a project creator from the campaign description and the included video and to analyze their effectiveness for influencing potential consumers. The influence was measured by means of project adoption by the crowd and diffusion on Facebook. Finally, article 4 investigates a governance decision made by the platform provider. Under the condition of a natural experiment, we were able to observe and analyze how a policy change by the platform owner with regard to their gatekeeping strategy can influence a platform ecosystem as a whole, as well as certain participants in particular. The policy change, made by Kickstarter in 2014, lowered the barrier for entering the platform for pro-ject creators, resulting in a shift in average quality, number of projects and platform revenue. Implications for future research and practice are discussed in depth for each article and summarized in the final chapter

Crowdfunding Success: A Perspective from Social Media and E-Commerce

Crowdfunding as a new way of financing in the web 2.0 has increased over the last years, but only little is known how project initiators increase their chances of successful fundraising through on-page and off-page communication activities. Using a dataset of 740 projects published on one of the dominant crowdfunding platforms in Switzerland, we test communication-related determinants of fundraising success in terms of (1) number of donations (2) average amount of donations and (3) total campaign success. Our results show that high media richness in the project presentation and a high frequency of project updates leverage fundraising success. In contrast, no beneficial effects of the simple application of social media channels could be observed. The implications for research on crowdfunding and practice are discussed

Innovating Beyond the Fuzzy Front End: How to Use Reward-Based Crowdfunding to Co-create with Customers

Current research suggests that crowdfunding not only serves as an alternative source of capital but also as a flexible tool allowing start-ups to systematically integrate a crowd into their innovation processes. However, an adequate understanding of how start-ups can systematically leverage the co-creation potential of their early customers during crowdfunding is still nascent. Against this background, the aim of this research is to conceptualize and examine the concept of co-creation in the context of reward-based crowdfunding. In doing so, we distinguish it from other methods of user integration in the realm of open innovation and discuss how entrepreneurs can leverage reward-based crowdfunding to engage their customers in the development and deployment of their product and service offerings