The impact of social media and e-WOM on the success of reward-based crowdfunding campaigns

Abstract

Crowdfunding (CF) is a financial tool that has faced an impressive growth over the past few years, and provides an alternative form of fundraising entrepreneurial projects. However, not all CF campaigns are successful in attracting the investors’ interest and obtaining the pledging goal. As CF is built over internet platforms, digital marketing strategies have been used to improve awareness and engage people to contribute with small amounts of money for a given CF campaign. Hence, this paper intends to study the effect of social media and electronic word of mouth (e-WOM) on the CF campaigns’ outcomes and whether these digital marketing strategies might influence the small investors’ decision to support or not a reward-based CF campaign. Using a sample of data from the second largest American reward-based CF platform (Indiegogo), we have applied the multiple OLS regression analysis, to assess the causal effect of various sets of variables in the success rate of a CF campaign. The findings show that social media and e-WOM strategies play a critical role and have a positive significant impact on a CF campaign.

Understanding Crowdfunding via Social Media: A Review of the Relevancy of Previous Studies

“…Clauss et al (2020) investigate the effects of social media reach and utilization on reward-based crowdfunding success. Bernardino et al (2021) study the impact of social media and electronic word of mouth on reward-based crowdfunding campaign success. Saleh et al (2021) examine the early crowdfunding response to the COVID-19 pandemic in the United States, highlighting the role of web-based crowdfunding and social media.…”

Zakat Fundraising Via Instagram: How Does It Advantageous for Zakat Institutions?

“…The study (Bin-Nashwan & Al-Daihani, 2021) highlights the significant impact of social media features, such as familiarity, interactivity, full utilization of features, user-friendliness, and well-presented information, in shaping positive attitudes towards online donations for those affected by the virus. (Bernardino et al, 2021) also stated that participation in online communities (specifically Facebook) and the electronic word-of-mouth (e-WOM) generated through comments on the project's website are crucial for achieving success in crowdfunding campaign. The positive impact of social media on the success of the campaign can be attributed to the extensive communication established with a wider audience, made possible by utilizing various digital communication platforms.…”

From hashtag to cashback: Success determinants in crowdfunders' user behavior

“…Currently, crowdfunding research, which is a form of digital infrastructure on the rise (Nambisan, 2017), is attracting the attention of more and more scholars as an alternative financial tool that has grown considerably in the last few years (Bernardino et al, 2021). Nevertheless, not all campaigns reach their funding goal.…”

“…A way to involve potential customers at an early stage, maintain the innovativeness of products and establish a financial base to implement a business model is by crowdfunding (Eiteneyer et al, 2019;Nambisan, 2017). Digital marketing strategies can raise awareness, communicate with the crowd, and encourage them to participate and invest their money in a particular crowdfunding campaign (Bernardino et al, 2021). Several studies have investigated digital communication in connection to crowdfunding (Eiteneyer et al, 2019;Kraus et al, 2016;Lu et al, 2014;Paolo Crosetto & Regner, 2014).…”