Name
Title | ||
|---|---|---|
Research Note---Performance-Based Advertising: Advertising as Signals of Product Quality |
Abstract | ||
|---|---|---|
Performance-based advertising is becoming increasingly popular in the online advertising industry, where advertisers pay the publisher only when the advertisement generates an “action” (e.g., a click-through or a purchase). This paper illustrates that adopting this emerging advertising scheme has profound impacts on one fundamental function of advertising---signaling product quality. We identify several important dimensions that affect the signaling function of performance-based advertising relative to its traditional counterpart (impression-based advertising). These include: (1) information---total advertising expenditure is determined after the demand is realized, so it is unobservable to consumers when making purchase decisions; (2) ad performance---the measured “performance” (e.g., recorded click-throughs) includes actions generated by first-time buyers (i.e., advertising performance) and actions generated by repeat buyers (i.e., product performance), which increases the cost of signaling through advertising; (3) demand uncertainty---the merchant pays only when a response to the advertisement is generated, which reduces the merchant's advertising uncertainty. We build a model of performance-based advertising by explicitly incorporating these factors, and we derive the conditions under which switching to performance-based advertising will (a) disable or strengthen the signaling function of advertising, (b) help or hurt the merchant, and (c) lead to a higher or lower advertising expenditure. |
Year | DOI | Venue |
|---|---|---|
2012 | 10.1287/isre.1110.0380 | Information Systems Research |
Keywords | Field | DocType |
total advertising expenditure,advertising uncertainty,performance-based advertising,advertising performance,online advertising industry,product performance,ad performance,research note,impression-based advertising,product quality,lower advertising expenditure,advertising scheme,advertising,signaling | Search advertising,Advertising research,Economics,Advertising,Native advertising,Informative advertising,Advertising account executive,Keyword advertising,Online advertising,Cost per impression,Marketing | Journal |
Volume | Issue | ISSN |
23 | 3-Part-2 | 1047-7047 |
Citations | PageRank | References |
0 | 0.34 | 10 |
Authors | ||
2 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Juan Feng | 1 | 31 | 4.03 |
| Jinhong Xie | 2 | 397 | 27.96 |