Sorry, that still makes no sense to me. Why would company B have to make a better product in reaction? They're not being impacted at all. Company A having more

Sorry, that still makes no sense to me. Why would company B have to make a better product in reaction? They're not being impacted at all. Company A having more and cheaper ads certainly won't make any users switch from B to A. It also won't make any existing advertisers stop spending on ads on B and run more ads on A, since the ads on B must have been profitable at the current price, and those ads are reaching a different set of users than the ads on A. Is it possible that those cheaper ads could create more demand for ads somehow? It seems hard to believe it could. Either it's a search term that people were already willing to buy more expensive ads for, and are now just happy to pay less, or it's a search term that nobody was willing to bid even minimum price for. What's actually going to happen in your scenario is that company A loses 90% of their revenue, goes bankrupt, and their domain is sold for a fair price to Company B or one of the other 98 remaining competitors.