Advertising Strategy For Mobile Platforms

The development of Internet technology raises an emerging operation mechanism-mobile platform with apps,such as Apple's iOS with apps in its app store.This mechanism has achieved tremendous success,which is partially due to the massive user base of this system.As more and more users adopt mobile platforms and communicate through apps,new types of advertising arise:in-platform advertising,in-app advertising,con-sumer referral reward program.Since the first two types of advertising are delivered by firms while consumer referrals are generated and implemented by consumers,I refer to the first two types as firm-engaged advertising and refer to the last type as consumer-engaged advertising.Although these types of advertising have been extensively used in practice and brought substantial revenue,if some issues are neglected in the implemen-tation,firms will suffer an unexpected loss.This dissertation focuses on the issues on three aspects.Specifically,regarding in platform advertising,for the platform owner(she),although charging app developers a large amount of money for displaying their ads in the platform brings much advertising revenue,this will decrease the app's advertising investment and in turn make the platform owner get less revenue from app sales.Regarding in-app advertising,an earlier adoption of the in-app advertising program generates more advertising revenue for the platform owner and the app developer(he),but this leads to a more terrible app user loss,which will erode the future revenue potential.Regarding consumer-engaged advertising,some firms use firm-engaged advertising and consumer-engaged advertising(consumer referral reward program)to promote their products,for the purpose of taking advantage of the strengths of these two campaigns on different aspects.However,when consumers are uncertain towards the value of the promoted product,the promotional mix of firm-engaged advertising and referral reward program will endogenize consumer valuation uncertainty,which will hurt the promotional performance.This dissertation aims to provide firms with instructions on how to manage the firm-engaged advertising(in-platform ad vertising and in-app advertising)and the consumer-engaged advertising(consumer referral reward program).It contributes to previous studies by capturing the above issues and bringing some results which are counterintuitive or different from the prior results as follows:First,I find that rather than always charging app developers aggressively,it would be better for the platform owner to participate in apps' advertising when her platform displays apps' ads and gets a high share of apps' sales revenue.In this situation,app developers get a small share of their sales revenue,while they should still increase their advertising efforts.This contradicts the common wisdom that firms' advertising effort should be reduced as the marginal revenue decreases.Surprisingly,when more apps enter the platform,it is unnecessary for app developers to consider the consequently negative impact when making advertising decisions,since the platform owner will alle-viate this effect through adjusting the in-platform advertising payment.Second,I find that if the importance of sales revenue from the app or the negative impact of in-app advertising increases,or the contribution of the in-app advertising revenue decreases,the adoption of the in-app advertising program should be delayed.It is unexpected that this decision is independent of the platform's and the app's advertising effectiveness and the platform owner does not need to consider the app's advertising effectiveness when determining her advertising effort.Moreover,with an increase in ease of app searching,the app developer should not always follow the platform owner to increase his advertising effort.He should decrease the advertising effort under a certain condition to free ride on consumers'spontaneous conversion from platform users to app users.Another interesting result is that in order to coordinate the mobile platform system,a central planner should adopt a mixed transfer payment scheme that includes both revenue sharing and advertising cost sharing.Third,I find that the promotional mix of firm-engaged advertising and consumer referral reward program should not always be adopted.One reason is that consumer referrals cause the waste of firm-engaged advertising.Although previous studies prove that firm-engaged advertising can enhance the effectiveness and the number of consumer interactions,the negative effect of consumer interactions on firm-engaged advertising performance also deserves attention.Furthermore,under a certain condition,an increase in the number of consumer referrals will decrease the profit,even if referrals are costless.Another reason is that with the promotional mix,to reduce the waste of firm-engaged advertising,the firm has to also attract those consumers who are only hyped by firm-engaged advertising and thus hold a high uncertainty level for the product.To compensate for their high uncertainty level,the firm must use a low price,while this will leave it unable to extract more surplus from those consumers who are reached by consumer referrals and thus possess a low uncertainty level.This result reminds the firm to be cautious about the interaction between different promotional campaigns and that between promotional strategy and pricing strategy.