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This gets to one big confusion I have, with ad revenue and volume decreasing why are the ad platforms selling more ad spots? When demand for ad spots falls, the
by flagrant_taco 3y ago
This gets to one big confusion I have, with ad revenue and volume decreasing why are the ad platforms selling more ad spots? When demand for ad spots falls, the supply of spots should fal as fast or slightly faster to avoid a price collapse.
Attempting to shore up revenue by trying to show even more ads is begging for your business to crumble and die a quick, painful death.
- jocaal 3y agoIn economics there is a concept, profit maximization, where it is determined at which prices the products will, well maximize profits, by taking into account marginal changes in supply and demand. I would be very surprised if the big ad companies didnt have a few economists do the calculations. https://en.wikipedia.org/wiki/Profit_maximization?wprov=sfla1 https://en.wikipedia.org/wiki/Profit_maximization?wprov=sfla...
- flagrant_taco 3y agoI'd be even more suprised if the profit maximization point when prices and the demand for ad spots were both down involved an even higher supply of ad spots for sale. Finding the right level to decrease supply by would be a tricky calculation to get right, but in no way could the right move be to further flood the market with supply.
- jocaal 3y agoYou have to remember economics is a model and not exactly how reality works, there are many examples where you will find the supply demand curves arent linear and there are also other things to take into account. Companies can artificially move the demand curves, for example the ad companies can change the quality requirements of what ads they allow, creating more demand. These calculations are best done with real numbers and experiments, kinda like A/B testing and I would guess that the ad companies have such infrastructure