Contagious Consumption: The Social Dynamics of Sharing Purchase Information on Spending in Freemium Networks

Social networks that o er the basic functionalities of a product for free, but charge a premium for additional features (“freemium networks”) have become a prevalent business model in today’s digital economy. In these networks, firms often encourage their customers to share information about their purchases of premium features with other customers. Drawing on social impact theory and social network theory, this article examines whether and how sharing of purchase information a ects other customers’ spending on premium features. Results of a large-scale longitudinal field study show that sharing is contagious and has a positive, yet temporarily decaying e ect on spending. The study also reveals that social characteristics of customers’ ego and global network account for this e ect. Specifically, customers not only spend more on premium features when they are shared by knowledgeable, interconnected, and numerous peers, but also when customers—themselves—operate as information “brokers” in the network. These findings advance the current understanding about the dynamic e ects of social interactions on spending in social networks and provide implications for firms running freemium models.