IDEAS home Printed from https://ideas.repec.org/a/bla/popmgt/v26y2017i2p189-202.html
   My bibliography  Save this article

A Mobile Platform's In‐App Advertising Contract Under Agency Pricing for App Sales

Author

Listed:
  • Lin Hao
  • Hong Guo
  • Robert F. Easley

Abstract

Unlike advertising in traditional media, a mobile platform's in‐app advertising market exhibits two unique features—split structure of the mobile platform with a platform owner and an app developer jointly provisioning in‐app advertising, and agency pricing for app sales. We develop a two‐sided market model to analyze the role of these two unique features in determining the platform owner's optimal advertising revenue‐sharing contract. Our results reveal an interesting N‐shaped dynamic regarding the platform owner's optimal choice of her ad revenue share with respect to the overall advertisers’ valuation of in‐app ads. We identify a between‐agent subsidization strategy for the platform owner, where she finds it optimal to subsidize the developer via the advertising channel, leading to greater profits for both of them. We find that the advertising revenue‐sharing contract under agency pricing for app sales leads to a higher app price than would be offered by the integrated platform found in traditional advertising. However, the ad price is coordinated under the platform owner's optimal choice of ad revenue share when she obtains revenue from both the advertising and app sales channels, leading to an alignment of her interest with the app developer's on ad level.

Suggested Citation

  • Lin Hao & Hong Guo & Robert F. Easley, 2017. "A Mobile Platform's In‐App Advertising Contract Under Agency Pricing for App Sales," Production and Operations Management, Production and Operations Management Society, vol. 26(2), pages 189-202, February.
    • Handle: RePEc:bla:popmgt:v:26:y:2017:i:2:p:189-202
    DOI: 10.1111/poms.12647
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/poms.12647
    Download Restriction: no
    File URL: https://libkey.io/10.1111/poms.12647?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:popmgt:v:26:y:2017:i:2:p:189-202. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1937-5956 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.