Friend or Foe: Search Engine Advertising Strategies When Contracting with an Online Search Infomediary

Posted: 17 Feb 2020

See all articles by Siddharth Bhattacharya

Siddharth Bhattacharya

Temple University - Department of Management Information Systems

Abhishek Roy

Temple University, Fox School of Business, Department of Marketing and Supply Chain Management

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management

Sunil Wattal

Temple University - Department of Management Information Systems

Date Written: February 11, 2020

Abstract

The widespread growth of e-commerce has resulted in the proliferation of online search infomediaries (OSIs), who provide consumers with information about products and services sold by different firms (Parents), while also referring interested consumers to the Parents' website. Very often, both the Parent and the OSI advertise and compete for a spot on sponsored search results on keywords related to the Parent. This has led to an interesting conundrum where the Parent and the OSI both compete and cooperate at the same time. In this unique context, how equilibrium payment and advertising strategies are affected by factors such as traffic quality, advertising effectiveness, leakage, and the nature of the contract between the two firms, remains an open question. Using a game-theoretic model, we investigate these effects in the strategic interaction between a Parent and its OSI. We show that the novel balance between the competitive and the collaborative nature of the interaction, which itself gets affected by the choice of contract and changes in the environmental factors, alters equilibrium strategies commonly expected in the existing literature. Through this research, we provide several useful and interesting insights, which can serve as guidelines for both Parents and OSIs in efficiently navigating their relationship.

Keywords: game theory, affiliate marketing, infomediary, contracting, advertising, traffic quality

Suggested Citation

Bhattacharya, Siddharth and Roy, Abhishek and Kumar, Subodha and Wattal, Sunil, Friend or Foe: Search Engine Advertising Strategies When Contracting with an Online Search Infomediary (February 11, 2020). Available at SSRN: https://ssrn.com/abstract=3536416

Siddharth Bhattacharya (Contact Author)

Temple University - Department of Management Information Systems ( email )

1810 N. 13th Street
Floor 2
Philadelphia, PA 19128
United States

Abhishek Roy

Temple University, Fox School of Business, Department of Marketing and Supply Chain Management ( email )

Philadelphia, PA 19122
United States

HOME PAGE: http://https://www.fox.temple.edu/mcm_people/roy-abhishek/

Subodha Kumar

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

Philadelphia, PA 19122
United States

Sunil Wattal

Temple University - Department of Management Information Systems ( email )

1810 N. 13th Street
Floor 2
Philadelphia, PA 19128
United States

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