Search Advertising: Budget Allocation Across Search Engines

Mohammad Zia () and Ram C. Rao ()
Additional contact information
Mohammad Zia: Argyros School of Business and Economics, Chapman University, Orange, California 92866
Ram C. Rao: Naveen Jindal School of Management, The University of Texas at Dallas, Richardson, Texas 75080

Marketing Science, 2019, vol. 38, issue 6, 1023-1037

Abstract: In this paper, we investigate advertisers’ budgeting and bidding strategies across multiple search platforms. We develop a model with two platforms and budget-limited advertisers that compete for advertising slots across platforms. When platform reserve prices are low and exogenous, we find that symmetric advertisers pursue asymmetric budget allocation strategies and partially differentiate : one advertiser allocates a share of its budget to platform A higher than A’s share of user traffic and a share of its budget to platform B lower than B’s share of user traffic, whereas the second advertiser does the reverse. This partial differentiation balances two forces: a demand force arising from a desire to be present on both platforms to obtain more clicks and a strategic force driven by a desire to be budget dominant on at least one platform to obtain clicks at a lower cost. We then show that the benefit from differentiation for advertisers diminishes if platforms strategically increase their reserve prices. At reserve prices that maximize platform revenues, advertisers allocate their budgets proportional to each platform’s share of user traffic, and platforms fully appropriate these budgets.

Keywords: search advertising; advertising budgets; differentiation; competitive strategy; auctions; bid jamming; game theory (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1287/mksc.2019.1186 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:38:y:2019:i:6:p:1023-1037

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().