Click to Success? The Temporal Effects of Facebook Likes on Crowdfunding

Abstract

Small and medium-sized businesses as well as individuals are increasingly using online crowdfunding platforms to raise funds in the fintech world. Creators of crowdfunding projects depend heavily on social networks like Facebook to publicize their projects. Social media activities such as “liking” on Facebook bring massive traffic to crowdfunding projects and attract contributions. Using data collected from Facebook and Kickstarter, our empirical tests demonstrate that social media activities significantly and positively impact the likely success of crowdfunding. Our duration model analysis reveals that the impact of social media activities on crowdfunding outcomes follows a J-curve in the temporal space. We explain the J-curve by identifying two important effects of social media activities throughout the crowdfunding process: a quality-signaling effect in the opening period and a herding effect in the closing period. Especially in the “last mile,” there is a strong herding effect that helps crowdfunding projects reach their respective fundraising goals. Our results offer useful contributions to the literature and suggestions for practitioners.