When to Play Your Advertisement? Optimal Insertion Policy of Behavioral Advertisement

Posted: 23 Apr 2018 Last revised: 16 May 2018

See all articles by Subodha Kumar

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management

Yinliang (Ricky) Tan

Tulane University - A.B. Freeman School of Business

Lai Wei

Shanghai Jiao Tong University (SJTU)

Date Written: April 23, 2018

Abstract

Digital advertisements offer a full spectrum of behavioral customization for timing and content capabilities. The existing research in display advertising has predominantly concentrated on the content of advertising, however our focus is on optimizing the timing of display advertising. In practice, users are constantly adjusting their engagement with content as they process new information continuously. The recent development of emotional tracking and wearable technologies allows platforms to monitor the user’s engagement in real time. We model the user’s continuous engagement process through a Brownian motion. The proposed optimal policy regarding the timing of behavioral advertising is based on a threshold policy with a trigger threshold and target level. Specifically, the platform should insert the advertisement when the user’s engagement level reaches the trigger threshold, and the length of the advertisement should let the user’s engagement level drop to the target level. Analogous to the familiar idea of “price discrimination,” the methods we propose in this study allow the platforms to maximize their revenue by “discriminatory” customization of the timing and length of the advertisement based on the behavior of individual users. Finally, we also quantify the benefits of the proposed policy by comparing it with the practically prevalent policies (i.e., pre-roll, mid-roll and a mix of the two) through a simulation study. Our results reveal that for a wide range of settings, the proposed policy not only significantly increases the platform’s profitability, but also improves the completion rate at which consumers finish viewing the advertisement.

Keywords: Behavioral Advertisement, Wearable Technology, Emotional Analytics, Brownian Motion

Suggested Citation

Kumar, Subodha and Tan, Yinliang and Wei, Lai, When to Play Your Advertisement? Optimal Insertion Policy of Behavioral Advertisement (April 23, 2018). Fox School of Business Research Paper No. 18-016. Available at SSRN: https://ssrn.com/abstract=3167301

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management ( email )

Philadelphia, PA 19122
United States

Yinliang Tan (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Lai Wei

Shanghai Jiao Tong University (SJTU) ( email )

800 Dongchuan Rd
Minhang, Shanghai 200240
China

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