Abstract: The advances of new technology have dramatically changed our lives and given rise to a unique kind of products -digital goods -that gain more and more popularities across industry boundaries. Different from traditional types of goods, the digital goods are non-physical, thus their production and transaction enclose almost no cost caused by geographic distance. Firms need to study their diffusion pattern to make better marketing strategy. With the aim to contribute to knowledge about the mechanisms underlying the diffusion of digital goods, about how the adoption pattern differs between different regions in China, and about the role that imitation behavior among consumers play in generating demand for digital goods, using a spatial panel data model, the weekly sales data on one type of digital goods—ring-back tone—at provincial level are analyzed, and the spatial correlations and spatial fixed effect are examined in its Internet sale process. Empirically, a spatial fixed-effect panel model is established, in which the impacts on the diffusion of digital goods come from: previous adopters of the digital goods in the same region, previous adopters from the neighborhood regions, potential consumers in the same region, and new adopters in the neighborhood regions at the same time. The results show that for the diffusion of digital goods, the spatial correlations do not disappear in the cyberspace. The imitation behaviours among the consumers is the direct driving force behind the its sales within a provincial region, and the consumption growths among nearby regions synchronize with each other, which is in accordance with the fashion products nature of ring-back-tone.

Key words: spatial correlations, digital goods, imitation, internet marketing