Sharing Online Advertising Revenue with Consumers
Source:
WINE (2008)
Abstract:
Online service providers generate much of their revenue by monetizing
user attention through online advertising. In this paper, we investigate {\em revenue sharing},
where the user is rewarded with a portion of the surplus generated
from the advertising transaction, in a cost-per-conversion advertising
system. While revenue sharing can potentially lead to an increased
user base, and correspondingly larger revenues in the long-term, we
are interested in the effect of cashback in the short-term, in
particular for a single auction.
We capture the effect of cashback on the auction's outcome via {\em
price-dependent conversion probabilities}, derived from a model of
rational user behavior: this trades off the direct loss in
per-conversion revenue against an increase in conversion rate. We
analyze equilibrium behavior under two natural schemes for specifying
cashback: as a fraction of the search engine's revenue per conversion,
and as a fraction of the posted item price. This leads to
some interesting conclusions: first, while there is an equivalence
between the search engine and the advertiser providing the cashback
specified as a fraction of search engine profit, this
equivalence no longer holds when cashback is specified as a fraction
of item price. Second, cashback can indeed lead to short-term
increase in search engine revenue; however this depends strongly on
the scheme used for implementing cashback {\em as a function} of the
input. Specifically, given a particular set of input values (user
parameters and advertiser posted prices), one scheme can lead to an
increase in revenue for the search engine, while the others may
not. Thus, an accurate model of the marketplace and the target user
population is essential for implementing cashback.
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