| By: |
Avimanyu Datta (ICFAI Business School Research Center, Calcutta);
Rwitankar Coondoo (ICFAI Business School Research Center, Calcutta) |
| Abstract: |
Extending and combining concepts from consumer surplus of product availability
and personalization strategies under privacy concern we made a model to
comprehend and justify the reasons for the increase in the spending on online
advertisements. We inductively found that with higher capability to sell
increased product variety online and with high consumer utility from
personalized services, investment in online advertisement will rise with a
greater exponential slope and reach the saturation point much later than with
lower levels of consumer utility and product variety. First, we linked online
advertisement with technology adoption, by using decision-theoretic model to
understand the probabilistic outcomes of when a firm decides to wait and
observe and when it decides to adopt. Then we tried to comprehend the
implications of consumer utility through personalized services and the
compensating variance through increased product variety. Considering, that
Internet adoption like most technology adoption will follow an S-curve we
inductively concluded, along with attached evidences, that spending in online
advertisements will follow the same path. The slope, inflection point and the
saturation point of the curve will depend on the ability to increase consumer
utility through personalization and the consumer variance with increased
product variety. Combining the concepts we also stated that a firm is more
likely to adopt online advertisement as a media for marketing if these two
features are optimized. |
| Keywords: |
Technology adoption, Bayesian function, Online Advertisement, Advertising channels, personalization, consumer surplus, compensating variance, Internet adoption, S-curve |
| JEL: |
C6 D5 D9 |
| Date: |
2005–07–10 |
| URL: |
http://d.repec.org/n?u=RePEc:wpa:wuwpge:0507008&r=mkt |