Zsolt Katona

Network Formation and the Structure of the Commercial World Wide Web

We model the commercial World Wide Web as a directed graph that emerges as the equilibrium of a game in which utility maximizing websites purchase (advertising) in-links from each other while also setting the price of these links. In equilibrium, higher content sites tend to purchase more advertising links (mirroring the Dorfman-Steiner rule) while selling less advertising links themselves. As such, there seems to be specialization across sites in revenue models: high content sites tend to earn revenue from the sales of content, whereas low content ones earn revenue from the sales of traffic (advertising). In an extension, we also allow sites to establish (reference) out-links to each other and find that there is a general tendency to establish reference links to sites with higher content. Finally, we explore network formation in the presence of search engines and find that the higher the proportion of people using them, the more sites have an incentive to specialize in certain content areas. Our results have interesting practical implications for search-engine optimization, the pricing of online advertising, and the choice of Internet business models. They also shed light on why Google can use the webs link structure to rank sites by content.

Media, Aggregators and the Link Economy: Strategic Hyperlink Formation in Content Networks

A key property of the World Wide Web is the possibility for firms to place virtually costless links to third-party content as a substitute or complement to their own content. This ability to hyperlink has enabled new types of players, such as search engines and content aggregators, to successfully enter content ecosystems, attracting traffic and revenues by hosting links to the content of others. This, in turn, has sparked a heated controversy between content producers and aggregators regarding the legitimacy and social costs/benefits of uninhibited free linking. This work is the first to model the implications of interrelated and strategic hyper-linking and content investments. Our results provide a nuanced view of the much-touted Olink economyO, highlighting both the beneficial consequences and the drawbacks of free hyperlinks for content producers and consumers. We show that content sites can reduce competition and improve profits by forming links to each other; in such networks one site makes high investments in content and other sites link to it. Interestingly, competitive dynamics often preclude the formation of link networks, even in settings where they would improve everyones profits. Furthermore, such networks improve economic efficiency only when all members have similar abilities to produce content; otherwise the less capable nodes can free-ride on the content of the more capable nodes, reducing profits for the capable nodes as well as the average content quality available to consumers. Within these networks, aggregators have both positive and negative effects. By making it easier for consumers to access good quality content they increase the appeal of the entire content ecosystem relative to the alternatives. To the extent that this increases the total traffic flowing into the content ecosystem, aggregators can help increase the profits of the highest quality content sites. At the same time, however, the market entry of aggregators takes away some of the revenue that would otherwise go to pure content sites. Finally, by placing links to only a subset of available content, aggregators further increase competitive pressure on content sites. Interestingly, this can increase the likelihood that such sites will then attempt to alleviate the competitive pressure by forming link networks.

The Role of Search Engine Optimization in Search Marketing

This paper examines the impact of search engine optimization SEO on the competition between advertisers for organic and sponsored search results. The results show that a positive level of search engine optimization may improve the search engines ranking quality and thus the satisfaction of its visitors. In the absence of sponsored links, the organic ranking is improved by SEO if and only if the quality provided by a website is sufficiently positively correlated with its valuation for consumers. In the presence of sponsored links, the results are accentuated and hold regardless of the correlation. When sponsored links serve as a second chance to acquire clicks from the search engine, low-quality websites have a reduced incentive to invest in SEO, giving an advantage to their high-quality counterparts. As a result of the high expected quality on the organic side, consumers begin their search with an organic click. Although SEO can improve consumer welfare and the payoff of high-quality sites, we find that the search engines revenues are typically lower when advertisers spend more on SEO and thus less on sponsored links. Modeling the impact of the minimum bid set by the search engine reveals an inverse U-shaped relationship between the minimum bid and search engine profits, suggesting an optimal minimum bid that is decreasing in the level of SEO activity.

Category Activation Model: A Spreading Activation Network Model of Subcategory Positioning When Categorization Uncertainty Is High

We develop a spreading activation model, which we call the category activation model, to predict where within a category structure consumers are likely to position a subcategory that they have created to accommodate a new hybrid product. Based on this model, we hypothesize that the probability that an individual will position a new category subordinate to a particular category i is proportional to the relative number of categories that are already subordinate to i. We report the results of two studies that support this hypothesis and provide evidence that accessibility is an underlying mechanism.

Information Communities: The Network Structure of Communication

This study puts forward a variable clique overlap model for identifying information communities, or potentially overlapping subgroups of network actors among whom reinforced independent links ensure efficient communication. We posit that the intensity of communication between individuals in information communities is greater than in other areas of the network. Empirical tests show that the variable clique overlap model is more useful for identifying groups of individuals that have strong internal relationships in closed networks than those defined by more general models of network closure. These findings extend the scope of network closure effects proposed by other researchers working with communication networks using social network methods and approaches, a tradition which emphasizes ties between organizations, groups, individuals, and the external environment.

Maersk Line: B2B Social Media—“It's Communication, Not Marketing”:

The case describes the launch of a social media platform by the largest container shipping company in the world Maersk Line garnered over 1 million fans on Facebook, 40,000 followers on Twitter, and 22,000 on Instagram They also launched and became active on other social media networks such as LinkedIn, Pinterest, and Google+ and created a social media home base for Maersk Line called Maersk Line Social that published articles and stories about the company in a less formal manner The case discusses the organizational aspects of the program launch, as well as pressure from the marketing department to better integrate the largely independent social media operation into the companys broader marketing efforts.

Competing for Attention in Social Communication Markets

We investigate the incentives for social communication in the new social media technologies. Three features of online social communication are represented in the model. First, new social media platforms allow for increased connectivity; i.e., they enable sending messages to many more receivers, for the same fixed cost, compared to traditional word of mouth. Second, users contribute content because they derive status- or image-based utility from being listened to by their peers. Third, we capture the role of social differentiation, or how social distance between people affects their preferences for messages. In the model, agents endogenously decide whether to be a sender of information and then compete for the attention of receivers. An important point of this paper is that social communication incentives diminish even as the reach or the span of communication increases. As the span of communication increases, competition between senders for receiver attention becomes more intense, resulting in senders competing with greater equilibrium messaging effort. This in turn leads to lower equilibrium payoffs and the entry of fewer senders. This result provides a strategic rationale for the so-called participation inequality phenomenon, which is a characteristic of many social media platforms. We also show that social differentiation may enhance or deter sender entry depending on whether it can be endogenously influenced by senders. Finally, we examine how the underlying network structure (in terms of its density and its degree distribution) affects communication and uncover a nonmonotonic pattern in that increased connectivity first increases and then reduces the entry of senders. This paper was accepted by Pradeep Chintagunta, marketing .

Multiply intersecting families of sets

Let [n] denote the set {1, 2, ...,n}, 2[n] the collection of all subsets of [n] and F ⊂ 2[n] be a family. The maximum of |F| is studied if any r subsets have an at least s-element intersection and there are no ρ subsets containing t + 1 common elements. We show that |F| ≤ Σi = 0t - s (n - s i) + t + ρ - s/t + 2 - s(n - s t + 1 - s) + ρ - 2 and this bound is asymptotically the best possible as n → ∞ and t ≥ 2s ≥ 2, r, ρ ≥ 2 are fixed.

Intersecting families of sets, no l containing two common elements

Abstract Let H denote the set {f 1 , f 2 ,…, f n } , 2[n] the collection of all subsets of H and F ⊆2 [n] be a family. The maximum of | F | is studied if any k subsets have a non-empty intersection and the intersection of any l distinct subsets (1⩽k | F | is (l−1)n+o(n).

Quality Score that Makes You Invest

Search engines and many social advertising platforms use the so-called quality score to favor certain advertisers in their advertising auction. While the standard justification for quality scores is the need to provide discounts to advertisers with higher click-through rates, this work examines the role of quality score in enticing heterogeneous advertisers to invest in quality and its impact on ad platforms’ revenue. The results suggest that a quality score function that rewards bidders in excess of their click-through rates does increase the quality investments but in a non-monotonic way. Higher rewards of landing page quality do not necessarily mean higher investments. Furthermore, such an improvement in quality levels often comes with a sacrifice of the auction revenue despite the higher bids. While the potential revenue impact for the auctioneer depends on the bidding strategies and auction formats, there exists a quality score function that ensures increased revenues by rewarding quality improvement. Several managerial implications for both advertisers and publishers are discussed.