182 / 2024-04-22 20:16:07

Monetizing Consumers Attention: Merchant Entry and Platform Operational Decisions

monetizing attention; platform operational decisions; advertising strategy; game theory

In the digital era, where consumer attention translates into revenue, how should platforms strategize to enhance or sustain consumer engagement? This article presents an economic model that delineates a platform that decides to capture consumer attention with two-dimensional heterogeneity. More specifically, the platform entices consumers by investing in diverse entertainment scenarios and monetizes the attention garnered from consumers by selling it to advertising merchants. We find that excessive capture of consumer attention can result in a lose-lose-lose scenario for the platform, consumers, and merchants. Despite a high consumer attention/traffic conversion rate, merchants should refrain from advertising on the platform. The platform's success or failure hinges on its attention capture strategy, with a moderate attention capture potentially yielding better outcomes.