The Impact of Electronic-Word-of-Mouth on Digital Microproducts: An Empirical Investigation of Amazon Shorts

The findings suggest that book ratings by readers – as a measure of electronic word-of-mouth – are not a good predictor of book sales, and book sales are correlated to the number of reviews, the reputation of the brand, and the status of complementary goods.

Abstract

This research seeks to assess the impact of electronic Word-of-Mouth (eWOM) on sales performance of digital goods. Digital microproducts – such as Amazon.com’s 49-cent short books, or Apple’s 99cent songs – are digital goods that can be sold anywhere, at any time, at a low acquisition cost and no delivery costs via Web-based electronic commerce. Set at a fixed and low price, it is expected that price elasticity no longer plays a dominant role in the purchasing decision. This research empirically measures the impact of electronic word-of-mouth, as measured by product ratings, brand ratings and ratings of complementary goods, on the microproduct buying decision. To this end, we have developed a demand model based on electronic word-of-mouth for digital microproducts. We conducted an empirical study using 551 “Shorts” from Amazon.com. Shorts are condensed versions of books in PDF formats for a fixed price of 49 cents. We tested and validated our proposed demand model. Our findings suggest that book ratings by readers – as a measure of electronic word-of-mouth – are not a good predictor of book sales. On the other hand, book sales are correlated to the number of reviews, the reputation of the brand (author), and the reputation of complementary goods. Finally, we present a number of theoretical and practical recommendations regarding the use of eWOM for online sales of digital microproducts.