Re:After GDPR, The New York Times cut off ad exchanges and k...
by com2kid on Wednesday January 16, 2019 @01:45PM
(#18923651)
You are assuming the ads don't have any impact on where Steve goes to buy.
In reality what happens is marketing runs an ad for $3000 offering a $1000 incentive, Steve makes the purchase, and making gets to (possibly correctly) claim they netted $1000 in sales.
Those marketing people want to keep their jobs, so they are going to work hard to justify their existence!
Re:After GDPR, The New York Times cut off ad exchanges and k...
by AnthonyMouse on Thursday January 17, 2019 @12:19AM
(#18928573)
> You are assuming the ads don't have any impact on where Steve goes to buy.
No, I am assuming that advertising works the same for everyone. If there are five dealers and fifty customers and with no advertising each dealer gets ten customers, then with each dealer spending $50,000 on targeted advertising, each dealer still gets ten customers. When each dealer spends the same amount they each get the same benefit, so they still split the existing customers five ways.
Re:After GDPR, The New York Times cut off ad exchanges and k...
by misterprime on Thursday January 17, 2019 @01:13PM
(#18933029)
What if two dealers spend a total of $20,000 and the other three don't spend anything?
Where are the customers gonna end up?
Re:After GDPR, The New York Times cut off ad exchanges and k...
by Ecolog on Wednesday January 16, 2019 @06:29PM
(#18926675)
What you are describing sounds a whole lot like the Prisoner's Dilemma. For the highest personal success we need to think about maximizing group benefit, rather than being completely self-interested. However, this is rarely the case when competition is involved.
Except that they do have a choice.
Suppose there are five competitors. Everybody knows Steve is going to buy a BMW 3 Series. The margin is $5000. Assuming everyone else is going to do what you're going to do, how much does it make sense to bid to advertise to Steve? If you bid $1000, you have a one in five chance of making a $5000 margin. If you bid $5000, you have a one in five chance of making $5000.
So the optimal amount to bid is $0, because you have the same one in five chance at $5000 if everyone bids $0 than if everyone bids $1000 or $5000, but then you have a $1000 expected value rather than a $0 or $-4000 one.
Now suppose the others aren't using the same utility function as you and so may bid a different amount and you get a bidding war. So the first thing that happens is somebody bids $100 expecting to make $5000 -- bully for them, until the second one bids $200. Everyone raises their bid to $1000 because that's what a 20% chance at $5000 is worth. If one of the competitors drops out, the others will raise their bid to $1250 because now it's a 25% chance.
Which means there's never any profit in it for the advertiser. If anybody plays then at least one competitor will retaliate and everybody loses a total of $5000 to the ad platform. If nobody plays, everybody gets an expected value of $1000. Being the first to quit costs you nothing, but being the first to play costs you and each of your competitors $1000. Who is going to play this game?