These facts motivate us to study the value of advertisements displayed on websites like ... been done discussing advertisements on web and there effects.
Advertising on Social Network Sites (SNS’s): A Structural Equation Modeling Approach
Anant Saxena, Uday Khanna
ABSTRACT Social networking sites (SNS‟s) emerged as one of the most powerful media for advertising across the globe. Companies are choosing social networking websites as a media for advertisements for two basic reasons. Firstly, huge viewers base of different demographics and secondly low cost in comparison to other media. These facts motivate us to study the value of advertisements displayed on websites like Facebook, LinkedIn and Twitter etc. This is an empirical study based on customers who often use social networking websites and thus, are exposed to advertisements displayed on these websites. Confirmatory factor analysis was done to test the reliability of instrument being used for data collection. Further, a model for measuring advertisement value was proposed by using second-generation multivariate technique „structural equation modeling‟. Results obtained confirm the respective roles of information, entertainment and irritation in accessing value of advertisements displayed on SNS‟s. Key words: Structural Equation Modeling, CFA, Social Networking Websites, Advertisement Value.
1. INTRODUCTION Social networking websites (SNS‟s) have emerged as the „need of the day‟. Their journey starts with the launch of sixdegrees.com in the year 1997, which attracts millions of users at that time. The site allowed user to create profiles listing their friends with the ability to surf the friends list (Boyd and Ellison, 2007). The big names of SNS‟s in present era like Facebook, Orkut, LinkedIn, My Space, Hi5 were launched in year‟s 200304. Within a short span of time, these websites become an addiction for youngster as these give them opportunity & platform to express their feelings and emotions in the society. Websites like Facebook, Orkut, Twitter, My Space have become household names and an integral part of people‟s life so much that it become tough for regular users to imagine a life without them. Globally, Internet users spend more than four and a half hours per week on SNS‟s, more time than they spend on e-mail. (Anderson, Sims, Price, and Brusa, 2010). As more & more of what people think and do ends up getting expressed on SNS‟s, it is expected that social networking sites affect the buying decisions greatly. In addition, the huge viewer‟s base of these websites makes them a favorable media for advertisements by different companies. Acc. to study released by comScore, Inc. a market research firm, social networking sites accounted for more than 20 percent i.e., one in five display ads of all display ads viewed online, with Facebook and MySpace combining to deliver more than 80 percent of ads among sites in the social networking category (comScore., 2009). According to (Rizavi, Ali and Rizavi, 2011) Social networking websites act as a good platform for advertising that attract millions of users from different countries, speaking multiple languages belonging to different demographics. According to (Trusov, Bucklin and Pauwels, 2009) referrals and recommendations on SNS‟s have a significant impact on new customer acquisition and retention. This fact led marketers to turn to Internet platforms like SNS‟s, Blogs, and other social media as an avenue for cost-effective marketing, employing e-mail campaigns, website advertisements and viral marketing. Also from a marketing perspective these websites gives potential customers the opportunity to virtually explore a business, encourage them to visit and at last share their views and experiences with their friends (Phillips, McFadden and Sullins, 2010). Understanding the effectiveness of SNS‟s in promoting product & services through advertisements, companies across the globe have increased their advertising budget for SNS‟s which lead to increase in revenue generation for social networking website companies. According to a report released by Interactive Advertising Bureau (IAB), internet-advertising revenues up to June 2011 totaled $ 14.9 billion in 2011, up 23 % from the $ 12.1 billion reported in 2010 (PricewaterhouseCoopers LLP., 2011). When talking about India, the same story continues. According to a report named „India Entertainment and Media Outlook‟, the size of internet-advertising industry was INR 7.7 billion in 2010 registering a growth of 28.3 % over INR 6 billion in 2009. The same report highlights that in India social networking sites have shown a remarkable growth of 43% in 2010 over 2009, with a 54 % growth
in advertising on SNS‟s in 2010-11 (PricewaterhouseCoopers Private Limited, 2011). Considering the fact that advertising on social networking sites is on a new high, this research focus on studying the value of advertisements displayed on SNS‟s.
2. THEORETICAL BACKGROUND & LITERATURE REVIEW Web advertising continues to be a major area of advertising research from a long time. Number of studies has been done discussing advertisements on web and there effects. (Berthon, Pitt and Watson, 1996) have discussed the role of World Wide Web as an advertising medium in the marketing communication mix and proved that World Wide Web is a new medium for advertising characterized by ease-of-entry, relatively low set up costs, globalness, time independence and interactivity. Being proved that www is an effective media for advertising other studies focuses on the impact of different variables like information content, entertainment and irritation on advertisement value. R.H Ducoffe introduced the concept of advertisement value in 1995. According to (Ducoffe, 1995) advertising value was defined as the utility or worth of the advertisement. (Ducoffe, 1996) in his another study on World Wide Web, proved the significant impact (either + ve or – ve) of entertainment, information & irritation on advertisement value. (Brackett and Carr, 2001) in their study on cyberspace advertising reports that information, entertainment, irritation and credibility significantly impacts advertisement value which in turn effects attitude towards advertisements. 1. Information – Information content is an important determinant of advertisement effectiveness. Companies advertise their products & services for one main reason – providing information about their product, services, and brand to consumers. If information is lost from the advertisements, it is of no use. Consumers report that supplying information is the primary reason why they approve advertising (Bauer, Greyser, Kanter and Weilbacher, 1968). According to (Norris, 1984) information in advertisements enables the customers to evaluate the products more rationally leading to improved markets with low prices and high quality of the product. Information content on internet can be delivered better in comparison to television medium, the reason being short time span of advertisements on television. According to (Berthon, Pitt, and Watson, 1996), advertisements through web provide information & generate awareness without interactive involvement. Internet advertising differs from traditional advertising as it delivers unlimited information beyond time & space and it gives unlimited amount and sources of information (Yoon and Kim, 2001).
2. Entertainment – An advertisement that is full of information but zero in entertainment content is not worthy. According to (McQuail, 1987) an advertisement entertains when it fulfills the audience needs for escapism, diversion, aesthetic enjoyment, or emotional release. The ability of advertising to entertain can enhance the experience of advertising. In addition, an advertisement can be information for one & entertainment for other person at the same time.
(Alwitt and Prabhaker, 1992). This shows that
entertainment and information are interrelated concepts when talking about advertisements. Consumers who found advertising to be entertaining also evaluate it as informative (Ducoffe, 1995). 3. Irritation – Irritation from advertisements arise when we feel discomfort in watching advertisement due to any reason. The reason can be personal or social. A personal reason can be can be distortion of concentration while working on a particular task on World Wide Web. According to (Wells, Leavitt and McConville, 1971) irritation is one amongst six dimensions of personal reactions towards advertising. It is the degree to which the viewer dislikes what he has seen. The words that came into mind of viewer at time of getting irritated from an advertisement are terrible, stupid, ridiculous, irritating and phony. Television advertisement can be rewarding for some viewers yet an irritant and unrewarding for others (Alwitt and Prabhaker, 1992). According to (Aaker and Bruzzone, 1985) increase in irritation can lead to general reduction in the effectiveness of advertisement. According to (Schlosser and Shavitt, 1999) Internet advertising generates considerable irritation, thus the literature suggests that irritation has a negative effect on the effectiveness of advertisement irrespective of the media. According to (Taylor , Lewin and Strutton, 2011) advertisements on social networking sites are differ not only in form and substance but also in delivery method. Some of the massages are “pushed” upon consumers while others rely on consumers to “pull” content, some generate revenue whereas some are non-paid content delivered through media content. In the same study authors also pointed out that SNS‟s advertisements can also be offered in offline mode e.g. tweets and fan pages. A considerable amount of research has been done on internet advertising but particular emphasis on SNS‟s advertising & its effects are discussed in very few studies. This study tries to study the access the value of advertisements displayed particularly on SNS‟s.
MODEL TESTING & FORMULATION OF HYPOTHESIS The importance of advertisements displayed on SNS‟s is increasing day-by-day. According to (Stelzner, 2011) 88 % of the marketers have reported that their social media advertisements have generated more exposure for their businesses. The objective of this study is to test a model for accessing the value of
advertisements displayed on SNS‟s by employing structural equation modeling approach. In addition, the interrelationships between the variables in the model are tested. The proposed hypotheses are as follows: H1: There is a significant positive impact of information content on the value of advertisements displayed on social networking websites. H2: There is a significant positive impact of entertainment content on the value of advertisements displayed on social networking websites. H3: There is a significant negative impact of irritation content on the value of advertisements displayed on social networking websites
METHOD Sample Design In present study, the sample includes postgraduate management students of a reputed college based in India. 276 students have responded to an online questionnaire mailed to 300 students. The questionnaires were mailed with Google documents facility to form & mail online forms/questionnaires. After removing incomplete questionnaires, only 189 questionnaires were found to be useable for analysis and further study. Resulting sample consists of 71 % males and 29 % females. Subjects were asked to report their reactions to instrument statements by considering their perceptions of advertisement on social networking sites in general, not a single advertisement or advertisement for any particular product. The objective of this generalization is to access the value of advertisement on social networking websites across different advertisements of product and service categories.
Sample size and SEM analysis Sample size is a key issue when performing SEM analysis. According to (Bentler and Bonnet, 1980), (Hair, 2007) chi square value is sensitive to increase in sample size. On the other hand, chi square lacks power to discriminate between good fit and poor fit models with small sample size. (Kenny and McCoach, 2003), (Hair, 2007) proposed that 15 responses per parameter is an appropriate ratio for sample size. Going on with this approach a sample size of 189 respondents for measuring 12 parameters was collected.
Research Instrument For measuring the advertisement value of advertisements displayed on Social media, a12 item scale developed by Ducoffe, R.H., 1995 is used. The instrument was modified for as per the need of the study. A five-item likert scale was used as a response scale from strongly disagrees to strongly agree.
MEASUREMENT MODEL Measurement model is a specification of the measurement theory that shows how constructs are operationalized by sets of measured items. Confirmatory factor analysis is used to test the reliability of a measurement model. Unlike Exploratory factor analysis, CFA allows the researcher to tell the SEM program which variable belong to which factor before the analysis (Hair, 2007). According to (Salisbury et al., 2001) CFA allows the researcher to specify the actual relationship between the items and factors as well as linkages between them. Construct Validity According to (Hair, 2007) construct validity is the extent to which a set of measured items actually represents theoretical latent construct those items are designed to measure. The reliability of advertisement value scale was examined by specifying a model in confirmatory factor analysis using AMOS 19. Reliability of an instrument can also be calculated by Cronbach‟s alpha but use of Structural Equation Modeling (SEM) technique make such a practice unnecessary and redundant (Bagozzi and Yi, 2011). The results (see Table 1) confirm the overall fit of a measurement model when employed to confirmatory factor analysis. Table 1 Model fit indices for Measurement model
Statistic Chi-square Df df (Hinkin, 1995), (Carmines and McIver, 1981) GFI (Hooper, Coughlan and Mullen, 2008), (Hair, 2007) AGFI (Muenjohn and Armstrong, 2008) SRMR (Hu and Bentler, 1999) CFI (Watchravesringkan, Yan and Yurchisin, 2008)
Recommended value
Obtained value
< 3.00 > 0.90 > 0.80 < 0.08 > 0.80
48 1.93 0.92 0.88 0.06 0.92
According to (Hair, 2007) one incremental fit index (CFI) , one goodness of fit index (GFI) , one absolute fit index (GFI, SRMR) and one bad ness of fit index (SRMR), with chi-square statistic should be used to assess a model‟s goodness of fit. Our study results show all the different types of indices in the acceptable range.
FIGURE 1 Measurement Model
Convergent and Discriminant Validity
Convergent validity exists when the items that are indicators of a specific construct, converge or share a high proportion of variance in common. In general, „Factor loading‟ and „Variance extracted‟ measures are used to measure convergent validity. We have used factor-loading measure in our study to measure convergent validity (Salisbury et al., 2001), (Hair, 2007). All the factor loadings are statistically significant, a minimum requirement for convergence (Hair, 2007). Furthermore, except items „Info 3‟ and „Irritation 1‟ all factor loadings are in the range of 0.50 to 0.80, which is more than acceptable value of 0.50 (Hair, 2007) (see figure 1).
According to (Chin, Gopal and Salisbury, 1997) discriminant validity exists if the correlation between the constructs is not equal to 1. Following the rule, our study shows the discriminant validity between the constructs (see figure 1).
STRUCTURAL MODEL
After assessing the eligibility of scale for measuring different variables in the study, the next step is to test the hypothesized relationships in a structural model. (Ducoffe, 1996) has proved the respective role of information, entertainment and irritation on advertisement value for the advertisements on web. We in our study explore the impact of these respective variables on advertisement value in case of advertisements displayed on SNS‟s.
FIGURE 2 Structural Model
Table 2 Model fit indices for Structural model Statistic
Recommended value
Obtained value
< 3.00 > 0.90 > 0.80 < 0.10 > 0.80
115.539 50 2.31 0.91 0.86 0.08 0.88
Chi-square Df df (Hinkin, 1995), (Carmines and McIver, 1981) GFI (Hooper, Coughlan and Mullen, 2008), (Hair, 2007) AGFI (Muenjohn and Armstrong, 2008) RMSEA (MacCallum, Browne and Sugawara, 1996) CFI (Watchravesringkan, Yan and Yurchisin, 2008)
Performance of the Model Hypothesized relationships are supported by the overall model fit indices obtained. All of the fit indices are above the recommended values. The df value is 2.31 met the recommended value of less than three (Carmines and McIver, 1981). (Hair, 2007) argues that chi square value is sensitive to sample size and number of variables therefore /df value is not taken as a sole indicator of model fit. Other model fit indicators taken are also with in the recommended range (see table 2). In sum, various model fit indices indicates that the proposed model fitted well with the present data set.
Estimated standardized path coefficients Figure 2 shows the standardized path coefficients of the four constructs under investigation. All the path coefficients were significant at the level of 0.01 with the direction of influence as hypothesized (+ or -). Information and Entertainment were positively associated with advertisement value whereas Irritation is negatively associated with advertisement value, thus all the hypotheses framed are statistically supported. A significant correlation between information and entertainment also indicates that the consumers who find advertisement to be entertaining are more likely to evaluate it as informative. These results are consistent with another study (Ducoffe, 1995). Finally, the squared multiple correlations (R2), indicates that the present model explains 38 percent of the variance in advertisement value.
DISCUSSION & IMPLICATION The study yielded important new insights about a topic that is important for both industry practitioners and academicians. The concept of advertisement value and factors affecting it has been tested for various types of advertisements in number of studies but lack of work for advertisements displayed on social networking websites was the motivating factor to do research in the particular domain. The study tests the model to access advertisement value by employing structural equation modeling approach. SEM approach is a statistical methodology that combines the strength of factor analysis and path analysis. SEM analysis was done in two major steps i.e. to test the measurement model and next a structural model. Measurement model was tested by means of confirmatory factor analysis (CFA). Measurement model provides the series of relationships that suggests how observed variables represent latent variables. Structural model tests the conceptual representation of the relationships between the latent variables. It tells whether the proposed model is eligible to represent a proposed concept and conceptual relationships between the variables or not. The results of confirmatory factor analysis suggests that the observed variables are suitable enough to represent different latent variables i.e. information, entertainment, irritation and advertisement value in the particular domain of social networking advertising. The findings of structural model analysis suggest that the proposed model for accessing the value of advertisements displayed on SNS‟s fits well. In addition, the proposed hypotheses accessing the relationships between the variables are statistically supported. The findings suggest that when advertisements displayed on SNS‟s provide entertainment and information content or impressions, it increase the worth of the advertisement. As has been proved true for other types of media advertising, consumers derive utility from advertisements that provide some useful or functional information and increases hedonic value by entertaining them. On the other hand, irritation decrease the net worth of the advertisements displayed on SNS‟s. This suggests that the companies using SNS‟s media for advertising their products and services should reduce the contents, which irritate the viewer‟s base. It is worth noting that “information” exhibited around 1.6 times more strength of influence on advertisement value than entertainment. This suggests that companies should firstly focus on providing information content in their advertisements to make their advertisements worth for consumers. In addition, it is interesting to note that findings of this study shows a significant correlation between information and entertainment, which indicates that consumers who find advertisement to be entertaining are more likely to evaluate it as informative.
LIMITATIONS Although the study has been done taking into account the methodological rigor, some limitations remain. Firstly, the sampling used is convenience sampling. Secondly, exploration of other variables that affects the value of advertisement is needed.
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