A Study On Advertising Efforts Strategies Of Mobile Platforms And APPs And Their Coordination

Currently,the booming mobile application market has gained immeasurable prominence in the global economy.In order to compete for market share,both mobile platforms and APP developers spare no effort to attract users' attention through advertising channels,thereby increasing their respective user bases.The interests of mobile platforms and APP developers are inextricably linked due to the existence of revenue-sharing contracts.Mathematical and economic modeling of the mobile application ecosystem in terms of advertising strategy is poorly studied in the existing literature and mostly based on static models.Using optimal control theory methods,this paper develops dynamic advertising decision models for mobile platforms and APP developers in integrated and decentralized systems,respectively.In the integrated system,the mobile platform and the APP developer are integrated into a single company and make collaborative decisions to maximize the total revenue,which is the ideal situation.In the decentralized system(Stackelberg Game),the mobile platform and the APP developer make decisions independently and separately to maximize their respective revenues,which is consistent with the actual situation.By comparing the equilibrium results between the integrated and decentralized systems,it is theoretically found that the decentralized system is less profitable than the integrated system.Therefore,this paper designs a bilateral participation contract that not only coordinates the mobile platform with the APP developer in the decentralized system but also enables the decentralized system to implement the optimal objective value(optimal revenue)of the integrated system.Finally,this paper gives necessary and sufficient conditions under which both the mobile platform and the APP developer can achieve a win-win situation from the bilateral participation contract.In addition,for different business scenarios,the following findings are also obtained in this paper.First,based on a dual policy scenario of subsidies and fees: when an APP developer only advertises on the mobile platform,the mobile platform can charge the APP developer aggressively or provide the APP developer with advertising subsidies.This paper gives the correct results of the previous literature regarding the optimal trajectories of the number of APP users.Further,the mathematical expressions for the optimal present value of profits corresponding to each of the mobile platform and the APP developer in the integrated system,the decentralized system,and the bilateral participation contract are supplemented.More importantly,the necessary and sufficient conditions for the conclusion that both the mobile platform and the APP developer can benefit from a bilateral participation contract,as proposed in the previous literature,are also supplemented.Second,based on the scenario of the mobile platform providing advertising subsidies for the APP developer: consider a mobile platform and a free APP.Suppose that users mainly download APPs through the mobile platform.The mobile platform and the APP developer use advertising promotion to expand their respective user bases.This paper not only considers the effect of the mobile platform's user base on the growth of APP users,i.e.,the APP's potential market effect created by the number of mobile platform users,but also the effect of the APP's user base on the growth of mobile platform users,i.e.,the recommendation effect generated by APP users.In the above scenario setting,taking the respective user bases of mobile platform and APP as state variables,this paper obtains the optimal advertising effort of each mobile platform and APP developer,as well as the optimal advertising subsidy rate set by the mobile platform for the APP developer.It is found that,due to the existence of the revenue-sharing contract between the mobile platform and the APP developer,the optimal advertising effort of the mobile platform increases with the effects that contribute positively to the APP's revenue,such as the APP's potential market effect.Similarly,since the mobile platform formulates advertising subsidy policies for the APP developer,the optimal advertising effort of the APP developer increases with the effects that contribute positively to the platform's revenue,such as the APP users' recommendation effect.In addition,the more the mobile platform shares the APP developer's revenue,the more the mobile platform provides the advertising subsidies for the APP developer.In particular,for the APP with high marginal sales revenue,if the mobile platform sets a minimum revenue-sharing rate for the APP developer,the mobile platform will not provide any more advertising subsidies for the APP developer.Interestingly,when the mobile platform's marginal sales revenue is zero,or the APP users' recommendation effect is invalid for the mobile platform's user growth,the minimum revenue-sharing rate for the APP is 1/3,which is mostly in line with the actual business scenario.For the APP with low marginal sales revenue,the mobile platform will consistently provide advertising subsidies for the APP developer,regardless of whether the mobile platform shares the APP developer's revenue.It is worth mentioning that if the revenue-sharing rate of the APP is equal to or more than 50%,the optimal present value of profit for the APP developer will definitely decrease with the APP's revenue-sharing rate.Third,based on the scenario of the mobile platform providing advertising subsidies for the APP developers: consider a mobile platform and multiple free APPs.Further,introduce an in-APP advertising mode where multiple free APPs can deliver ads to each other.This paper considers the negative impact of in-APP advertising on the growth of APP users.Meanwhile,in order to increase the revenue of the in-APP advertising,the APP developers are willing to provide advertising subsidies for other APP advertisers.In the above scenario setting,with the respective numbers of users of the mobile platform and the APPs as state variables,this paper obtains the optimal advertising efforts of the mobile platform and the APP developers respectively,as well as the optimal advertising subsidy rate set by the mobile platform for the APP developers.It is found that under the in-APP advertising mode,If an APP's advertising effort has a greater negative impact on the number of users of the other APPs,then the less advertising subsidies the mobile platform provides for that APP.If an APP pays more advertising fees to the other APPs,then the mobile platform provides higher advertising subsidies for that APP.If the other APPs provide higher advertising subsidies for that APP,then the mobile platform provides lower advertising subsidies for that APP.Furthermore,there is a competition between APPs.Suppose that two APPs exist in the system.If the marginal sales revenue of one of the APPs is higher,then the mobile platform provides less advertising subsidies for the other APPs.If the mobile platform shares more revenue from one of the APPs,then the mobile platform provides less advertising subsidies for the other APPs.Finally,based on the scenario of the paid APP developer providing advertising subsidies for the mobile platform: consider a mobile platform and a paid APP.The mobile platform's and the developer's respective efforts in advertising recommendation and product quality will influence the user's reference price and goodwill towards the paid APP,thereby determining the download volume of the paid APP.In order to incentivize the mobile platform to increase the advertising recommendation effort for the paid APPs,the paid APP developer is willing to bear part of the advertising recommendation costs for the mobile platform,i.e.,provide advertising subsidies for the mobile platform.In the above scenario setting,taking user's reference price and goodwill of the paid APP as state variables,this paper finds out the optimal efforts of the mobile platform and the developer in terms of advertising recommendation and product quality of the paid APP,respectively,as well as the optimal advertising subsidy rate that the paid APP developer is willing to provide for the mobile platform.It is found that the optimal respective efforts of the mobile platform and the developer on advertising recommendation and product quality of the paid APP can effectively help to increase the reference price of the paid APP,thus making the steady-state value of the reference price higher than the current selling price of the paid APP,which is a significant impetus for the number of the paid APP downloads.Additionally,the smaller the difference between the current selling price and the reference price of a paid APP affects the fluctuation of the reference price(such users are considered as loyal users),the higher the reference price of the paid APP for such users will be.When dealing with more loyal users,the mobile platform and the developer will increase their respective efforts in terms of advertising recommendation and product quality for the paid APP.However,when dealing with very low loyalty users,the mobile platform and the paid APP developer can ignore the effect of the reference price.Moreover,if the mobile platform shares 2/3 or more of the paid APP download fees,the paid APP developer will be reluctant to pay any advertising subsidies to the mobile platform.However,if the mobile platform no longer shares any paid APP download fees,then the paid APP developer is willing to bear the full advertising recommendation cost for the mobile platform.In conclusion,this paper uses dynamic mathematical economic modeling to explore the problems of advertising efforts strategies and coordination between mobile platforms and APPs in different business scenarios.It is hoped that this paper can further improve the profitability of the mobile application ecosystem and provide constructive and instructive measures and solutions for establishing win-win cooperation and a mutually beneficial business environment between mobile platforms and APP developers.