Pricing Banner Advertisements in an Online Social Network

Abstract

This paper examines the impact of social capital on advertisement prices in an online social network. Specifically, I show that a widely-employed measure of social capital - network constraint - explains variation in prices of 846 banner advertisements appearing within a social network formed by 89 'Liberal' and 84 'Conservative' weblogs. As predicted, weblogs that bridge 'structural holes' between otherwise disconnected segments of the network command significantly higher prices for their advertisements.