What Drives Virtual Gift Consumption in Online Communities?
The Roles of Gift Price, Giver Status, and Recipient Status
A econometric research
Objective
To explore how the gift price, the giver’s status, and the recipient’s status, as well as their interactions, affect recipients’ virtual gift consumption decisions in online communities.
Virtual gifts refer to any non-physical items that can be purchased, sent, received, and consumed as gifts. Existing social networking platforms (e.g., Live Journal, TikTok) and virtual worlds (e.g., Kim Kardashian Hollywood, Second Life) offer a wide range of virtual gift options, such as avatar accessories, apparel, food, and home decor.
Second Life
Methods & Analysis
Method: semi-structured in-depth interview [check interview protocol]
Data: 19,654 gift consumption incidents with a consumption rate of 62% in an European online virtual world
Analysis: binary probit model with the control function approach to address endogeneity due to status acquisition and with the Heckman’s two-step correction approach to address endogeneity due to selection bias.
Key Insights
Recipients are 16% more likely to consume a virtual gift as the gift price increases by .25 USD.
Recipients are 13% more likely to consume a virtual gift as the giver’s status increases by 0.1 unit.
Recipients are 17% more likely to consume a virtual gift as their own status increases by 0.1 unit.
*status is measured by degree centrality—the number of friends the user has in the nondirectional social network
The marginal effect of gift price on virtual gift consumption decreases as the giver’s status or the recipient’s status increases.
The marginal effect of giver status on virtual gift consumption decreases as the recipient’s status increases.
Note: The points on the figure can be interpreted as the effect of one variable at the corresponding value of the moderating variable. For example, in Panel A, for a recipient in the 95th percentile of giver status, if the gift price goes up by an infinitesimal amount, the probability of gift consumption rises by -.05%, whereas for a recipient in the 5th percentile of giver status, if gift price goes up by an infinitesimal amount, the probability of gift consumption rises by .33%. Managerial Implications
Enhance the Virtual Gift Recommendation & Tailor Virtual Gift Promotion
Integrate giver and recipient characteristics (e.g., the relative status between them) as an additional feature in designing gift recommendation system and tailoring gift promotion (in addition to the existing features)
Nudge the Acquisition of Status & Increase the Salience of User Status
Display user status through status badges of varying different sizes and levels on their profiles
Encourage users to attain status by acquiring membership or expanding their connections
Elevate the perceived status of users through semantic priming
A simple example: “To our honored friend [recipient’s name]: You have received a gift from the prestigious [giver’s name]. We hope you enjoy it!”