Online advertising, retail platform openness, and long tail sellers

• Main Authors: CHEN, Jianqing, GUO, Zhiling
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: Databases and Information Systems; E-Commerce; Technology and Innovation
• Online Access: https://ink.library.smu.edu.sg/sis_research/3928; https://ink.library.smu.edu.sg/context/sis_research/article/4930/viewcontent/onlineadver.pdf
• Institution: Singapore Management University

It becomes increasingly popular that some large online retailers such as Amazon open their platforms to allow third-party retail competitors to sell on their own platforms. We develop an analytical model to examine this retailer market place model and its business impact. We assume that a leading retailer has both valuation advantage that may come from its reputation and information advantage that may come from its brand awarenewss. We find that the availability of relatively low-cost advertising through social media or search engine can effectively reduce the leading retailer's information advantage, and thus be an important driving force for its strategic decision to open its platform. Not only does the advertising option directly make small sellers more visible to consumers, but also incentivizes the online retailer to open its platform and dramatically increases small sellers' exposure, indirectly contributing to an even more prominent long tail phenomen on in e-commerce.