Pricing display ads and contextual ads: Competition,acquisition, and investment |
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Authors: | Yung-Ming Li Jhih-Hua Jhang-Li |
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Affiliation: | Institute of Information Management, National Chiao Tung University, Management Building 2, 1001 Ta Hsueh Road, Hsinchu 300, Taiwan |
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Abstract: | Most websites are simultaneously supported by display advertising and contextual advertising. In this paper, we develop an economic model to examine the profitability of these two ad types in both a monopolistic market and duopolistic market, identifying the influence of impression benefit and click benefit. We find that in the duopolistic market a rival channel’s professional ability to enhance a visitor’s impression is beneficial to the channel offering contextual advertising. We also find that the strength of a search engine is limited in the duopolistic market; therefore, acquisition becomes a prime strategy to reveal the value of contextual advertising. |
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