Personalizing Ad Load to Optimize Subscription and Ad Revenues: Product Strategies Constructed from Experiments on Pandora

Published Online:https://doi.org/10.1287/mksc.2022.0357

References

  • Adachi T, Hashizume R, Ikeda T, Nariu T, Okada T (2023) Fairness concerns. Recent Advances in the Theory of Third-Degree Price Discrimination: A Nexus to Network Effects, Innovation, and Behavioral Aspects (Springer, Singapore), 43–59.CrossrefGoogle Scholar
  • Aguiar M, Hurst E, Karabarbounis L (2013) Time use during the great recession. Amer. Econom. Rev. 103(5):1664–1696.CrossrefGoogle Scholar
  • Allender WJ, Liaukonyte J, Nasser S, Richards TJ (2021) Price fairness and strategic obfuscation. Marketing Sci. 40(1):122–146.LinkGoogle Scholar
  • Anderson SP, Coate S (2005) Market provision of broadcasting: A welfare analysis. Rev. Econom. Stud. 72(4):947–972.CrossrefGoogle Scholar
  • Anderson SP, Gans JS (2011) Platform siphoning: Ad-avoidance and media content. Amer. Econom. J. Microeconom. 3(4):1–34.CrossrefGoogle Scholar
  • Anderson SP, Jullien B (2015) The advertising-financed business model in two-sided media markets. Anderson SP, Waldfogel J, Strömberg D, eds. Handbook of Media Economics, vol. 1 (Elsevier, Amsterdam), 41–90.Google Scholar
  • Anderson SP, Foros O, Kind HJ (2018) Competition for advertisers and for viewers in media markets. Econom. J. (Lond.) 128(608):34–54.Google Scholar
  • Ansari A, Mela CF (2003) E-customization. J. Marketing Res. 40(2):131–145.CrossrefGoogle Scholar
  • Becker GS, Murphy KM (1993) A simple theory of advertising as a good or bad. Quart. J. Econom. 108(4):941–964.CrossrefGoogle Scholar
  • Blake T, Nosko C, Tadelis S (2015) Consumer heterogeneity and paid search effectiveness: A large-scale field experiment. Econometrica 83(1):155–174.CrossrefGoogle Scholar
  • Chiang R, Spatt CS (1982) Imperfect price discrimination and welfare. Rev. Econom. Stud. 49(2):155–181.CrossrefGoogle Scholar
  • Chiou L, Tucker C (2013) Paywalls and the demand for news. Inform. Econom. Policy 25(2):61–69.CrossrefGoogle Scholar
  • CNET (2002) Now showing: Random DVD prices on Amazon. Accessed July 7, 2024, https://www.cnet.com/news/now-showing-random-dvd-prices-on-amazon/.Google Scholar
  • Council of Economic Advisors (2015) Big data and differential pricing. Executive Office of the President of the United States (Executive Office of the President of the United States, Council of Economic Advisors, Washington, DC), 1–21.Google Scholar
  • Cowan S (2012) Third-degree price discrimination and consumer surplus. J. Indust. Econom. 60(2):333–345.CrossrefGoogle Scholar
  • DellaVigna S, Gentzkow M (2019) Uniform pricing in us retail chains. Quart. J. Econom. 134(4):2011–2084.CrossrefGoogle Scholar
  • Deneckere RJ, McAfee PR (1996) Damaged goods. J. Econom. Management Strategy 5(2):149–174.CrossrefGoogle Scholar
  • Dubé J-P, Misra S (2023) Personalized pricing and consumer welfare. J. Political Econom. 131(1):131–189.CrossrefGoogle Scholar
  • Edgecliffe-Johnson A (2009) Media wants to break free. Accessed July 7, 2024, https://www.ft.com/content/d0960f18-4303-11de-b793-00144feabdc0?fbclid=IwAR06SW3pqxG14RVQVKqjgO2Nap-xF9gNlpVcycTuGRstKVdWi6aL1Bb2VHU.Google Scholar
  • Farrell MH, Liang T, Misra S (2021) Deep neural networks for estimation and inference. Econometrica 89(1):181–213.CrossrefGoogle Scholar
  • Gentzkow M (2007) Valuing new goods in a model with complementarity: Online newspapers. Amer. Econom. Rev. 97(3):713–744.CrossrefGoogle Scholar
  • Gentzkow M, Shapiro JM, Yang F, Yurukoglu A (2024) Pricing power in advertising markets: Theory and evidence. Amer. Econom. Rev. 114(2):500–533.CrossrefGoogle Scholar
  • Godes D, Ofek E, Sarvary M (2009) Content vs. advertising: The impact of competition on media firm strategy. Marketing Sci. 28(1):20–35.LinkGoogle Scholar
  • Goldstein DG, Suri S, McAfee RP, Ekstrand-Abueg M, Diaz F (2014) The economic and cognitive costs of annoying display advertisements. J. Marking Res. 51(6):742–752.CrossrefGoogle Scholar
  • Goli A, Lambrecht A, Yoganarasimhan H (2024) A bias correction approach for interference in ranking experiments. Marketing Sci. 43(3):590–614.LinkGoogle Scholar
  • Halbheer D, Stahl F, Koenigsberg O, Lehmann DR (2014) Choosing a digital content strategy: How much should be free? Internat. J. Res. Marketing 31(2):192–206.CrossrefGoogle Scholar
  • Hauser JR, Urban GL, Liberali G, Braun M (2009) Website morphing. Marketing Sci. 28(2):202–223.LinkGoogle Scholar
  • Hitsch GJ, Hortacsu A, Lin X (2021) Prices and promotions in US retail markets. Tech. Rep. 1–80.Google Scholar
  • Hitsch GJ, Misra S, Zhang W (2023) Heterogeneous treatment effects and optimal targeting policy evaluation. Preprint, submitted November 6, http://dx.doi.org/10.2139/ssrn.3111957.Google Scholar
  • Holtz D, Lobel R, Liskovich I, Aral S (2020) Reducing interference bias in online marketplace pricing experiments. Preprint, submitted April 26, https://arxiv.org/abs/2004.12489.Google Scholar
  • Horvitz DG, Thompson DJ (1952) A generalization of sampling without replacement from a finite universe. J. Amer. Statist. Assoc. 47(260):663–685.CrossrefGoogle Scholar
  • Huang J, Reiley D, Riabov N (2018) Measuring consumer sensitivity to audio advertising: A field experiment on Pandora Internet Radio. Preprint, submitted April 21, http://dx.doi.org/10.2139/ssrn.3166676.Google Scholar
  • Hupperich T, Tatang D, Wilkop N, Holz T (2018) An empirical study on online price differentiation. Proc. Eighth ACM Conf. Data Application Security Privacy (Association for Computing Machinery, New York), 76–83.Google Scholar
  • Kahneman D, Knetsch JL, Thaler R (1986) Fairness as a constraint on profit seeking: Entitlements in the market. Amer. Econom. Rev. 76(4):728–741.Google Scholar
  • Kaji T, Manresa E, Pouliot G (2023) An adversarial approach to structural estimation. Econometrica 91(6):2041–2063.Google Scholar
  • Kar W, Swaminathan V, Albuquerque P (2015) Selection and ordering of linear online video ads. Proc. 9th ACM Conf. Recommender Systems (Association for Computing Machinery, New York), 203–210.Google Scholar
  • Kim J, Park Y, Kim G, Hwang SJ (2017) SplitNet: Learning to semantically split deep networks for parameter reduction and model parallelization. Proc. 34th Internat. Conf. Machine Learn., vol. 70 (PMLR, New York), 1866–1874.Google Scholar
  • Kumar S, Sethi SP (2009) Dynamic pricing and advertising for web content providers. European J. Oper. Res. 197(3):924–944.CrossrefGoogle Scholar
  • Lambrecht A, Misra K (2017) Fee or free: When should firms charge for online content? Management Sci. 63(4):1150–1165.LinkGoogle Scholar
  • Lewis RA, Reiley DH (2014) Online ads and offline sales: Measuring the effect of retail advertising via a controlled experiment on Yahoo! Quant. Marketing Econom. 12(3):235–266.CrossrefGoogle Scholar
  • Li KJ, Jain S (2016) Behavior-based pricing: An analysis of the impact of peer-induced fairness. Management Sci. 62(9):2705–2721.LinkGoogle Scholar
  • Lin S (2020) Two-sided price discrimination by media platforms. Marketing Sci. 39(2):317–338.LinkGoogle Scholar
  • Martinez J (2014) Acer and HP to preload Dropbox on all laptops, PCs. Accessed July 7, 2024, https://www.techradar.com/news/internet/cloud-services/acer-and-hp-to-preload-dropbox-onall-laptops-pcs-1270862.Google Scholar
  • Mattioli D (2012) On Orbitz, Mac Users Steered to Pricier Hotels. Wall Street Journal (August 23), https://www.wsj.com/articles/SB10001424052702304458604577488822667325882.Google Scholar
  • Mikians J, Gyarmati L, Erramilli V, Laoutaris N (2012) Detecting price and search discrimination on the Internet. Proc. 11th ACM Workshop Hot Topics Networks (Association for Computing Machinery, New York), 79–84.Google Scholar
  • Moshary S, Tuchman A, Vajravelu N (2024) Gender-based pricing in consumer packaged goods: A pink tax? Marketing Sci. Forthcoming.Google Scholar
  • Murty KG, Kabadi SN (1985) Some NP-complete problems in quadratic and nonlinear programming. Technical report, The University of Michigan, Ann Arbor, MI.Google Scholar
  • Mussa M, Rosen S (1978) Monopoly and product quality. J. Econom. Theory 18(2):301–317.CrossrefGoogle Scholar
  • Pérez-Peña R, Arango T (2009) They pay for cable, music and extra bags. How about news? Accessed July 7, 2024, https://www.nytimes.com/2009/04/08/business/media/08pay.html.Google Scholar
  • Prasad A, Mahajan V, Bronnenberg B (2003) Advertising vs. pay-per-view in electronic media. Internat. J. Res. Marketing 20(1):13–30.CrossrefGoogle Scholar
  • Rafieian O (2023) Optimizing user engagement through adaptive ad sequencing. Tech. Rep. 5: 910–933.Google Scholar
  • Rafieian O, Yoganarasimhan H (2021) Targeting and privacy in mobile advertising. Marketing Sci. 40(2):193–218.LinkGoogle Scholar
  • Rafieian O, Yoganarasimhan H (2023) AI and personalization. Artificial Intelligence Marketing 77–102.Google Scholar
  • Rochet J-C, Tirole J (2003) Platform competition in two-sided markets. J. Eur. Econom. Assoc. 1(4):990–1029.CrossrefGoogle Scholar
  • Rossi PE, McCulloch RE, Allenby GM (1996) The value of purchase history data in target marketing. Marketing Sci. 15(4):321–340.LinkGoogle Scholar
  • Sahni NS, Wheeler SC, Chintagunta P (2018) Personalization in email marketing: The role of noninformative advertising content. Marketing Sci. 37(2):236–258.LinkGoogle Scholar
  • Salop S (1977) The noisy monopolist: Imperfect information, price dispersion and price discrimination. Rev. Econom. Stud. 44(3):393–406.CrossrefGoogle Scholar
  • Sato S (2019) Freemium as optimal menu pricing. Internat. J. Indust. Organ. 63:480–510.CrossrefGoogle Scholar
  • Shalit U, Johansson FD, Sontag D (2017) Estimating individual treatment effect: Generalization bounds and algorithms. Proc. 34th Internat. Conf. Machine Learn., vol. 70 (JMLR.org), 3076–3085.Google Scholar
  • Shapiro C, Carl S, Varian HR (1998) Information Rules: A Strategic Guide to the Network Economy (Harvard Business Press, Boston).Google Scholar
  • Shiller BR (2013) First Degree Price Discrimination Using Big Data (Brandeis University, Department of Economics, Waltham, MA).Google Scholar
  • Simester D, Timoshenko A, Zoumpoulis SI (2020) Efficiently evaluating targeting policies: Improving on champion vs. challenger experiments. Management Sci. 66(8):3412–3424.LinkGoogle Scholar
  • Smith AN, Seiler S, Aggarwal I (2023) Optimal price targeting. Marketing Sci. 42(3):476–499.LinkGoogle Scholar
  • Tåg J (2009) Paying to remove advertisements. Inf. Econom. Policy 21(4):245–252.CrossrefGoogle Scholar
  • Valentino-DeVries J, Singer-Vine J, Soltani A (2012) Websites vary prices, deals based on users’ information. Accessed July 7, 2024, https://www.wsj.com/articles/SB10001424127887323777204578189391813881534.Google Scholar
  • Varian HR (1985) Price discrimination and social welfare. Amer. Econom. Rev. 75(4):870–875.Google Scholar
  • Wager S, Athey S (2018) Estimation and inference of heterogeneous treatment effects using random forests. J. Amer. Statist. Assoc. 113(523):1228–1242.CrossrefGoogle Scholar
  • Wang Z, Schaul T, Hessel M, Hasselt H, Lanctot M, Freitas N (2016) Dueling network architectures for deep reinforcement learning. Proc. 33rd Internat. Conf. Internat. Conf. Machine Learn., vol. 48 (JMLR.org), 1995–2003.Google Scholar
  • Wei Y, Jiang Z (2022) Estimating parameters of structural models using neural networks. USC Marshall School of Business Research Paper, University of Pennsylvania, Philadelphia.Google Scholar
  • Wilbur KC (2008) A two-sided, empirical model of television advertising and viewing markets. Marketing Sci. 27(3):356–378.LinkGoogle Scholar
  • Wilbur KC, Xu L, Kempe D (2013) Correcting audience externalities in television advertising. Marketing Sci. 32(6):892–912.LinkGoogle Scholar
  • Xia L, Monroe KB (2010) Is a good deal always fair? Examining the concepts of transaction value and price fairness. J. Econom. Psychol. 31(6):884–894.CrossrefGoogle Scholar
  • Yang S (2022) China unveils new rules targeting anticompetitive practices by internet companies. Accessed October 5, 2023, https://www.wsj.com/articles/china-unveils-new-rulestargeting-anticompetitive-practices-by-Internet-companies-11629199116.Google Scholar
  • Yoganarasimhan H (2020) Search personalization using machine learning. Management Sci. 66(3):1045–1070.LinkGoogle Scholar
  • Yoganarasimhan H, Barzegary E, Pani A (2022) Design and evaluation of optimal free trials. Management Sci. 69(6):3220–3240.LinkGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.