Neta Livneh (Tel Aviv University)
Title: Is Peer Influence Essential for Product Success? Insights from a Large Digital Ecosystem
A general conjecture is that successful products attain their popularity through the influence of adopters on their peers and product information disseminating over the social network. Indeed, many studies have confirmed the existence of local peer effects and contagion. But others have shown that peer influence has a marginal if any, effect on cascades of adoptions. In this work, we study this discrepancy by analyzing video games propagating over the social network of gamers on Steam, the world’s largest video game platform. A major identification problem – distinguishing homophily from peer influence – is a challenge in any peer influence study based on observational data. To overcome it, we introduce a novel method that estimates the impact of peer influence on adoption by using an unsupervised machine-learning algorithm to match product adopters to users based solely on the similarity of their past adoption. This procedure is applied to thousands of products and reveals how peer influence changes over their lifecycle, allowing us to draw general conclusions about the entire ecosystem. Results show that most products belong to one of two distinct groups, each exhibiting a characteristic temporal pattern of adoption: products that exhibit substantial peer influence; and products that do not, for which users' preferences drive adoption. Considering the reach of products in each group, surprisingly, we found that local peer effects are stronger in less popular products. Even more surprising is the fact that almost all blockbusters (products adopted by millions of users) did not exhibit substantial peer influence at any stage of their lifecycle. We suggest that the fit between product characteristics and platform users’ preferences mediates the effect. These results shed light on the discrepancy between the observed local peer effects and the lack of peer influence in adoption cascades characteristic of successful products.