Assessing value in product networks

Traditionally, the value of a product is assessed according to its direct revenues. However, products do not exist in isolation but rather influence one another's sales. Such influence is especially evident in eCommerce environments, where products are presented as a large-scale product network. We present the first attempt to use a systematic approach to estimate products' true value to a firm in such settings. We separate a product's value into its own intrinsic value, the value it receives from the network, and the value it contributes to the network. Using data from the network of books on Amazon, we examine the relationship between revenue and the sources of value. We show that the value of low-sellers is underestimated when focusing on direct revenue, while the value of bestsellers is overestimated. We explore the sources of this discrepancy and discuss the implications for managing products in an environment of product networks.