The Network Value of Products

Traditionally, the value of a product has been assessed according to the direct revenues the product creates. However, products do not exist in isolation but rather influence one another's sales. Such influence is especially evident in e-Commerce environments, where products are often presented as a collection of webpages linked by recommendation hyperlinks, creating a large-scale product network. Here we present a systematic approach to estimate products' true value to a firm in such a product network. Our approach, which is in the spirit of the PageRank algorithm, uses easily available data from large-scale electronic commerce sites and separates a product’s value into its own intrinsic value, the value it receives from the network, and the value it contributes to the network. 
We apply this approach to data collected from web product networks, and in particular  Amazon.com and BarnesAndNoble.com. Focusing on one domain of interest, we find that if products are evaluated according to their direct revenue alone, without taking their network value into account, the true value of the "long tail" of electronic commerce may be underestimated, whereas that of bestsellers might be overestimated, and discuss the possible antecedents of this phenomenon.

Prof. Barak Libai is on the marketing group of the Arison School of Business at the Interdisciplinary Center (IDC), Herzliya, Israel. Previously was a faculty member in the Recanati Graduate School of Business, Faculty of Management, Tel Aviv University, at the Industrial Engineering and Management faculty of the Technion - Israel Institute of Technology, and a visiting Prof. at the MIT Sloan School of Management.
His research deals much with customer social effects such as word of mouth, and their effect on new product growth and the firm's profitability, growth of markets for new products, and customer relationship management. He has published in journals such as Marketing Science, Journal of Marketing, Journal of Marketing Research, Journal of Service Research and the International Journal of Research in Marketing, among others. His research on the economic consequences of customers' interactions have won prizes from the Journal of Service Research, The Marketing Science Institute, The American Marketing Association, the International Journal of Research in Marketing and ESOMAR. He teaches courses on customer centric marketing, brandings and social media marketing.