Research On Pricing Of Social Network Advertisement

Undoubtedly, with the improvement of people’s living standards and their demand level, people’s social needs are also being satisfied and extended in various degrees. Meanwhile, thanks to the rapid development of social networks and their integration with other network media, the profit model rooted in the social network also sprung up rapidly. As the main profit model of social networking online advertising is undoubtedly pushed to the forefront of theoretical and practical research. Therefore, the rapid development of social networks has brought opportunity to the analysis of ad pricing based on social networks. Firstly, with respect to the traditional online advertising pricing, the online advertising pricing considered the features of social networking can offer social networking enterprises greater consumer surplus, which may improve their profits further; secondly, a reasonable price-asking mechanism for social network will guide the behaviors of both social network users and advertisers, coordinate of interests of bilateral participants, and thus realize the Pareto Optimality of their behavior. Thirdly, most social networks still remain the traditional online advertising pricing and does not pay adequate attentions to the importance of social relations within social network, considering the gap between existing online advertising pricing methods and relative theoretical studies, which makes the existing online advertising pricing difficult to meet the needs of social network advertising reasonable price. Finally, from the view of product characteristics, the social network advertising price is affected by the number of social users, the other side of social platform and vice versa, which reveals the exist of bilateral market effects. Therefore, similar to traditional advertisements published on newspapers, social networking advertising pricing also belongs to the category of bilateral market, and the level of the price is indirectly affected by social users inevitably. In this way, the analysis of advertising pricing based on the theory of bilateral markets will be able to compensate the disconnecting between theory and practice effectively in social network environment, and enhance social network profitability and market efficiency and reduce deadweight lost under social platforms’ reasonable coordination of social users and advertisers.In this regard, the paper starts with using the method of reasoning theoretical modeling to analyze the problem under study: Firstly, the paper based on the perspectives of relevant theories on bilateral market investigates the existence of cross-network externalities of social users to social network advertising prices, which can more comprehensively analyze the rational behaviors of social networking companies and bilateral participants. Secondly, the paper inspects the existence of social network externalities by investigating the characteristics of two-sided markets and social networking. Thirdly, the paper enhances the process of social network companies to social users through the externalize price transformation. Finally, the paper attempt to realize the benefits optimization of social network platform in condition of the maximization of social users’ utilities and advertisers’ profits, which obtains the optimal advertisement price-asking model of social relations, i.e. the Relation-Intensity Model(R-I model).Further, by model reasoning and empirical data analysis and investigating the number characteristics, the paper concludes creatively that social network advertising price grows firstly and reduces after a certain value with the increase of social users,that is that there is a threshold value of social network advertising price on social users. Meanwhile,further analysis suggests that there exists the effects of economies of scale and first-mover advantage within social networks and the quality characteristics of social users(such as higher network clustering coefficient) begins to occupy a dominant position only if the number exceeds a certain size; At the same time, social networking businesses can bring higher profits price increase, namely scale effects exceeds the prices with the increases of price elasticity of demand for advertising. Thus, the thesis emphasizes the important effects of social relations and core social users through analyzing the existing social network advertising pricing issues and their modeling and empirical analysis, which foreshadows further analysis to solve related problems. In addition, the paper also extends the insights of the theoretical study of social network advertising pricing and close to the reality desirable advertising prices by means of integrating the bilateral market and social networking.