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How Can Game Theory Help Your PPC Marketing?

Game Theory, as we’ve seen in class, has many applications. In fact, 1-800 Contacts recently applied it to their Pay Per Click (PPC) advertising. The reason for the theory is that competing companies spend hundreds of thousands of dollars in advertising only to steal each other’s customers. What good does all that advertising money do if the company gains a certain amount of customers, only to lose approximately the same amount to a competitor?

Here’s where the game theory comes in. If companies agree to stay away from each other’s customers and focus on their own niche, then everyone in that industry benefits. This seems like a tricky task, but it becomes easy when dealing with Remarketing Lists for Search Ads (RSLA). An RSLA item is recorded when a customer visits a website and shops for certain things, maybe even putting items into his/her cart without checking out. That website will then target ads to those customers for the very items they were looking at. In this article from small business trends, the author poses the idea that competing companies could disclose their customer lists and avoid customers on each other’s RSLA as to not steal customers from each other.

Even though the article is mostly theoretical, there are some interesting implications for game theory. And as we’ve learned from class, Nash equilibria like this one can often be contradictory. Who knew that targeting less customers would help companies be better off?

How Can Game Theory Help Your PPC Marketing?

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