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It’s partially a prisoner’s dilemma. Advertising reduces search costs for buyers to a certain point, after which it raises them again due to a glut of similar m
by 1123581321 5y ago
It’s partially a prisoner’s dilemma. Advertising reduces search costs for buyers to a certain point, after which it raises them again due to a glut of similar messaging. There is a moderate point at which buyers are hearing about enough potential options and are able to conduct a more effective search for products/vendors/sellers, and the cost is reasonable for the sellers (it reduces their sales costs, gets their economy of scale beyond the threshold needed to viable produce and serve customers.)
Beyond that moderate point is where the dilemma sets in as each company wants to increase advertising until the additional return is no longer positive—-but if every company pushes to the same point, the additional return at that stopping point becomes negative.
- Spivak 5y agoWhich is why I think push advertising is the wrong model for product discovery. Facebook has all the information to be the best shopping meta-search in the world. They could become the go-to place for product discovery usurping Amazon and Google if they just turned their ad platform around and let shoppers drive. AliExpress has this flow almost perfected but they are ultimately still limited by the sellers on their site where Facebook wouldn’t be.
- 1123581321 5y agoCertainly FB/Ali’s model is appropriate for many markets. There is still a perverse incentive since the publisher/market-maker doesn’t want to limit investment in advertising, but the degree to which campaigns can be measured makes it harder to hide the results of overspending.