Comparative Advantage
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Munich Personal RePEc Archive
Comparative Advante and Efficient
Advertising in the Attention Economy
Huberman, Bernardo and Wu, Fang
Information Dynamics Laboratory, HP Labs
03 November 2006
Online at http://mpra.ub.uni-muenchen.de/928/
MPRA Paper No. 928, posted 07. November 2007 / 01:24
Comparative Advantage and Efficient Advertising in the Attention Economy
Bernardo A. Huberman and Fang Wu
HP Labs, Palo Alto, CA 94304
November 3, 2006
Abstract
We analyze the problem that enterprises face when having to decide on the most effective way to advertise several items belonging to their inventories within the company’s webpages. We show that the ability to arbitrarily partition a website among items leads to a comparative advantage among webpages which can be exploited so as to maximize the total utility of the enterprise. This result, which also applies to the case of several competitive providers, is then extended to dynamical scenarios where both the advertising allocation and the exposure levels vary with time. 1
Introduction
A distinguishing feature of the information era is the saliency of people’s attention as a scarce resource. Unlike an earlier time when information was not ubiquitous and thus a valuable resource, its easy availability has shifted the focus to the limited bandwidth that people can devote to ubiquitous media and news. This explains the new predominance of intangibles like style and design, as opposed to the more physical content of products, when attempting to capture the limited attention of consumers [14].
A glaring and old example of the competition for attention is advertisement, which has always exploited the prevailing technology to reach audiences effectively. As insights and methods from fields as disparate as psychology and operations research became available, advertisers used them to both target more effectively their audience and to decide how to optimally allocate financial
R
Munich Personal RePEc Archive
Comparative Advante and Efficient
Advertising in the Attention Economy
Huberman, Bernardo and Wu, Fang
Information Dynamics Laboratory, HP Labs
03 November 2006
Online at http://mpra.ub.uni-muenchen.de/928/
MPRA Paper No. 928, posted 07. November 2007 / 01:24
Comparative Advantage and Efficient Advertising in the Attention Economy
Bernardo A. Huberman and Fang Wu
HP Labs, Palo Alto, CA 94304
November 3, 2006
Abstract
We analyze the problem that enterprises face when having to decide on the most effective way to advertise several items belonging to their inventories within the company’s webpages. We show that the ability to arbitrarily partition a website among items leads to a comparative advantage among webpages which can be exploited so as to maximize the total utility of the enterprise. This result, which also applies to the case of several competitive providers, is then extended to dynamical scenarios where both the advertising allocation and the exposure levels vary with time. 1
Introduction
A distinguishing feature of the information era is the saliency of people’s attention as a scarce resource. Unlike an earlier time when information was not ubiquitous and thus a valuable resource, its easy availability has shifted the focus to the limited bandwidth that people can devote to ubiquitous media and news. This explains the new predominance of intangibles like style and design, as opposed to the more physical content of products, when attempting to capture the limited attention of consumers [14].
A glaring and old example of the competition for attention is advertisement, which has always exploited the prevailing technology to reach audiences effectively. As insights and methods from fields as disparate as psychology and operations research became available, advertisers used them to both target more effectively their audience and to decide how to optimally allocate financial
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