Abstract

Facebook, the leading social networking site, has opened its platform to developers and allow them to publish
applications. Subsequently, numerous Facebook applications of various types were designed and deployed.
Despite a huge portion of applications without business context, there exist a substantially increasing number of
applications tailored specifically for marketing and advertising. From a business perspective, a Facebook
application possesses the advantages of low development costs and strong word-of-mouth effect, which provide
an ideal alternative to traditional advertising formats. This paper utilizes the well-known Bass model for
forecasting product diffusion, and proposes its adaptation to produce an optimal promotion budget allocation for
Facebook applications. For a given application promotional budget to be used over a fixed timeframe, the model
offers a unique solution for allocating the funds between direct promotion and indirect promotion
(word-of-mouth) in order to achieve a maximum percentage of user installations from the target population of
potential users. Numerical examples are provided to illustrate the optimal solution and suggestions are made for
future research necessary to validate the model for possible use by practitioners.

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