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Amazon’s Top Choice or Top Ad Slot

https://investorplace.com/2018/10/amazon-adds-value-with-digital-ads/

A company that is coming closer and closer to Google in both publicity and market value is Amazon. While Amazon still receives most of its revenue from retail, it is continuing to branch into the online ad market. Millions of users submit search queries daily looking for a product that will fit their needs and be delivered quickly to their door. This creates high demand for advertisers to receive the best slots in which to display their brand.

The link above details some specifics on how Amazon does that in order to maximize a profit. It is very similar to the Generalized Second Price auction with advertisers bidding to have their ad displayed on a particular slot. Although it goes further by taking into account the issues with the generalized method mentioned in class, particularly how it does not take into account ad quality as well as all other ads on the page.

The interesting thing about advertising on Amazon is that companies have a high value for slots relating to their own product, as well as to their competitors products. The example used in the article includes Procter and Gamble’s Tide detergent versus Unilever detergent. Both of these businesses will compete to be the top slot on “detergent” and even on the specific search of “tide”. Furthermore, it’s unsurprising that Amazon has a lot of information on its users and is beginning to allow advertises a share of that data. So if someone is known to be environmentally friendly, the advertisers will want to include that kind of specialization in their own marketing, making slots on Amazon that much more valuable. A lot of the Generalized SPA method does not account for this which demonstrates the complexity of the market, however companies will still likely use similar strategies as those we discuss in order to find their best response and best bid.

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