Multi-Platform Online Advertising, Ad Position Prominence, and Customer Cross-Visiting

Abstract

Many customers visit several online platforms before making a product purchase. These online platforms often offer multiple "ad positions" that advertisers can obtain via bidding in an auction. The ad positions differ in their "prominence" - the probability of engaging incoming visitors. We investigate advertisers and platforms strategies in markets with multiple competing platforms and advertisers, and customers who visit several platforms ("cross-visitors"). We find that, in the presence of customer cross-visiting, sufficiently similar advertisers will "differentiate" by obtaining a more prominent ad position on one platform and a less prominent ad position on the other. Also, if platform ad positions are not sufficiently prominent, more cross-visiting by consumers can lead to higher profits for both advertisers and platforms (a win-win situation). Finally, we show that customer cross-visiting can benefit advertisers by inducing competition between platforms and lowering their equilibrium reserve prices. Our work has important managerial implications for platforms and advertisers in marketplaces where customers visit multiple platforms.

Keywords: Multi-Platform Online Advertising, Position Prominence, Consumer cross-visiting, Second-Price Auction, Competition