The Strategy Of Determining Search Engine Marketing Approach And Investment Ratio

Popularity of the Internet has led to the development of information industry.Searching for information has become an indispensable part of people's lives,resulting in the rapid development of Search Engine Marketing. There are mainly two main streams in search engine marketing: search engine optimization, SEO and paid search marketing, PSM. In practice, firms would apply both to do marketing.However, it is rare to see in the literature that why firms would invest in SEO or PSM jointly and how to allocate the investment. But few people has done research on this subject before.In this paper, we study this subject deeply.Our paper would apply a static game model of perfect information to analyze the investment of two firms with equal quality of the SEM investment. Our model suggests that:(1)For the industry with low transportation cost, the optimal strategy for the firm would be investing in both. To be more specific, for the cooperation game, the firm would gradually decrease investment in SEO with the increase in quality. While for repeated game, the optimal strategy for the firm would be that 50% of the investment would be in PSM and the investment proportion shows a reverse u shape.(2)For the industry with high transportation cost, the optimal strategy is different for the industry with high transportation cost, for one period game, the firm would be better off by either investing in SEO or PSM. While for repeated game, it is optimal for the firm to invest in SEO to make sure that it can be shown at the top of the organic links.This paper enriches the research of the investment portfolio in SEO and PSM and provides theoretical guidance of investment in SEM for different industries.