COMPETING ADVERTISING AND PRICING STRATEGIES FOR LOCATION-BASED COMMERCE

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1 COMPTING ADVRTISING AND PRICING STRATGIS FOR LOCATION-BASD COMMRC Nng-Yao Pa, Insue of Informaon Managemen Naonal Chao Tung Unversy, Tawan, Yung-Mng L, Insue of Informaon Managemen Naonal Chao Tung Unversy, Tawan, Absrac Owng o he fas growh n smar hones and ables as well as ncreasng number of downloadng as, makes commercal sense o use he smar hones as anoher laform for adversng. Whle many advanced locaon-based servce (LBS) as have been roosed, he sudy of analysng her macs on he markeng sraeges s sll lle. In hs aer, we sudy he ssues of he romoon rcng scheme and moble LBS adversng level of he sores. We wll also nvesgae he mac of LBS on he sore s rcng sraegy and corresondng rof when havng an ooruny of beng a frs mover or facng he ressure of beng a second mover o ado moble LBS adversng. Our resuls show ha he sores wll adverse more and gve hgher dscouns o her cusomers when he rooron of consumers wh a moble devce s ncreasng. The rce and LBS adversng cos wll affec he sores rofs. We fnd ha he economc nenon o ado LBS adversng s hgher for a frs mover han a second mover. Keywords: Locaon-Based Servce, Moble Adversng, Game Theory, Prcng Scheme, Cone- Awareness. 1 INTRODUCTION Locaon-based servces (LBS) have aealed huge aenon due o her oenal o ransform moble communcaons and he ossbly for a varey of hghly ersonalzed and cone-aware servces (Dhar & Varshney, 2011). I makes commercal sense o use he smar hones as anoher laform for adversng. Many surveys redc bllons of dollars n revenues for moble adversng. One of he key benefs of moble adversng s he ably o be n he momen and o connec wh consumers wherever hey are locaed. Imagne ha you no only have he ably o reach consumers wherever hey are, bu now you can also undersand her surroundngs. Cone awareness echnology, based on he clues from a consumer's surroundngs, can hel you delver your message o your arge cusomers n a much more ersonalzed and valuable way. Mobly and LBS combned wh cone aware adversng creaes oorunes for argeed markeng and revenue generaon. LBS are a class of comuer rogram servces, ncludng he secfc locaon and me daa as conrol feaures n comuer rograms, whch s accessble wh moble devces and whch uses nformaon on he geograhcal oson of he moble devce. Ths servce has become more and more moran as he growh of he marke of smar hones and ables. LBS are used n a varey of suaons, such as adversng, eneranmen, healh, ndoor obec search, ec. 1

2 There are many moble adversng laforms n he marke, such as AdMob, AD, InMob, Facebook, and Von ec. Through hese laforms, he alcaon develoers can easly add adversng elemens no as and share adversng revenue. The adversers can adverse n-a ads whn he alcaons. Comared wh radonal dslay ads, hs form of adversng more emhasze on audo, vdeo, and s desgned accordng o he characerscs of moble devces. The user can enoy he neracve adversng ourney. Wh LBS, hese laforms can rovde moble ads whch are hghly relevan o he user s locaon. The adversers can rovde he sore s nformaon, adverse n he assgned locaons and realze onlne o offlne. For eamle, Aud use InMob s locaon-enabled ads n Jaan o arac consumers o local car dealers ha delver ersonalzed ads o moble consumers wh GPS locang caables. The GPS locaor ma shows he neares sore o oenal consumers and dslays he nformaon and hone number of he sore. Anoher case s T.G.I. Frday s resauran, hrough LBS osonng adversng mechansm of Von, consumers can enoy oyful adversng vdeos, whch can mmedaely dslay he neares sore and allow consumers o share nformaon o socal webses. Consumers can go o he neares resauran va moble ma navgaon or use he call funcon o call he resauran. The combnaon of moble adversng, brand, and he roduc aracs consumers no he raccal sream of locaon based commerce. Some as feaures, such as LBS adversng, mac he comeon sraeges of he hyscal sores. In hs aer, we develo a model of wo geograhcally dfferenaed sores whch sell homogeneous roducs. In addonal o he orgnal way of nformng cusomers, he sores can use LBS adversng o arac more consumers. To nduce more vss of cusomers, he sore has o some eer adversng effor. From he vew of he cusomers, he benefs of he moble as nclude boh search value creaon (such as value-added nformaon and servce, dscoun, eneranmen) and search cos reducon (e.g. he suor of GPS and LBS). Neverheless, even hough he oulary of moble devces s connuously ncreasng, some rooron of he eole sll have no own one ye. In hs aer, we consder wo yes of consumers: users wh a moble devce and users whou a moble devce. ach consumer s locaed a a dfferen geograhc oson. For hose cusomers whou a moble devce, hey don know eacly her geograhc locaon and he dsance o he sores. For hose cusomers wh a moble devce, hey have a chance o be nformed by a sore s LBS adversng and know her curren locaon. Wh he avalably of LBS as, how o develo he arorae LBS adversng level and roduc romoon dscoun rae o ence more cusomers and generae hgher rof becomes a new challenge. Mos of he esng LBS sudes are conduced from he echncal and sysem desgn ersecve, he works on he economc analyss and comeon sraegy of LBS are sll lle. In hs aer, we wll also nvesgae he mac of moble echnology on he comeng adversng and rcng sraeges of hyscal sores, and analyse he mac of marke srucure (he frs mover nvasve enry and he second mover defensve enry) on he moble LBS adversng adoon. The remander of he aer s organzed as follows. In secon 2, we revew he relaed leraures. Secon 3 we descrbe he model of hs aer. In secon 4, we dscuss he mlcaons of our analycal resuls. Fnally, secon 5 rovdes concludng remarks and offers fuure research drecons. 2 LITRATUR RVIW Adversng s an moran way for sores o nform cusomers he roducs. Sores can use nformave adversng o le cusomers o know he roducs and so ha cusomers can choose he bes o mee hey need (Soberman, 2004). Trole (1988) dsngush wo vews on adversng. One s he aral vew, ha adversng s rovdng roduc nformaon o he consumers and ncreasng comeon. The oher s he adverse vew; adversng s ersuadng he consumers 2

3 and ncreasng barrers o enry. In he suaon of no well dfferenaed roducs, he revous leraures on nformave adversng show ha he effec of adversng n ncreasng rce comeon s domnaed he effec of decreasng comeon. Ghosh and Sock (2010) show ha enhance adversng level may be assocaed wh hgher rofs and hgher rces for comeng sores. Wh he ncreasng growh of smar hones and ables, locaon-based servce becomes very oular. Many surveys forecas ha moble adversng revenue wll grow very quckly. For eamle, Garner says ha global moble adversng revenue s eeced o reach $11.4 bllon n 2013 (Garner, 2013). Accordng o IAB (Ineracve Adversng Bureau) and ech researcher Ovum, n he ne wo years, 19% of US moble markeers wll ncrease moble adversng sendng and lan o u her moble adversng budges by 50% or more (emarkeer, 2013). So ha moble adversng s an moran ssue for emergng moble commerce. The feaure of ubquy of moble devce rases he roles of locaon, me, and ersonalzaon o become more moran. I makes sores o rovde more suable adversemens o cusomers (Shoab & Rassan, 2012). In hs sudy, we wll consder he sores offer LBS adversng o ncrease her revenue n he roosed model. Cone can be any nformaon ha can be used o descrbe he suaon of any eny. Dey (2001) roosed hree knds of feaures for cone-aware alcaons are resenaon, eecuon and aggng. Coneual adversng s he argeed delvery of adversemens; aears on many meda, such as webses, moble browsers, and moble as. Many webses have offered coneual argeng as her man rooson (Zhang & Kaona, 2012). Wh argeed adversng, he consumers who have a srong reference o he frm s roduc are he argeed consumers, and frms have adversng more o hs segmen of consumers (Iyer, Soberman, & Vllas-Boas, 2005). The moble devces can receve real-me nformaon and many alcaons are coneaware, he ads can dslayed based on consumer s rofles and references. The hyscal sores can resen he nformaon and servces o cusomers. However, as consumers have dfferen references for roducs, he frms don have ably o adverse and sell her roducs o all knds of consumers. So ha he frms mus lm her range of adversng o he arge grou of consumers (Shy, 1996). Addonally, he consumer can choose he knds of ads ha he or she wan o receve on he moble devces (Dhar & Varshney, 2011). Through he moble devce wh GPS, he hyscal sores can ush he dscoun nformaon o nearby cusomers and arac hem o vs he sores. Laer we wll develo he omal dscoun rcng sraegy and a adversng level for he comeng sores. 3 TH MODL Wh he growh of smar hones, here s a new form of adversng ha negraes moble adversng wh LBS. The LBS echnology s used o non consumer locaon and rovde locaon-secfc adversemens or nformaon on her moble devces. Ths form of moble adversng s hghly argeed and ersonalzed. No only does serve cusomers well, s also good for he hyscal sores. LBS nclude servces o denfy a locaon of a erson, such as dscoverng he neares resauran or a frend. Ths knd of servces can reduce he searchng cos and ransacon cos. LBS can eede moble commerce hrough akng he form of couons or adversng dreced a cusomers based on her curren locaon. Nowadays, brck and morar busness owners have made an effor o ake advanage of moble commerce by ulzng moble caables, such as locaon based servces, and barcode scannng o mrove he cusomer eerence of shong n hyscal sores. Moble-commerce can ransform busness rocesses n erms of effcency and servce qualy as well as creae new consumer markes ha nvolve hghly argeed servces because of s unque characerscs, such as locaon and cone 3

4 awareness, ersonalzaon, and ransacon orenaon (Varshney, 2008). Adversng s gradually becomng a ar of he modern eole's daly lfe. Besdes radonal adversng, hyscal sores can choose LBS adversng o arac cusomers. We wan o know under wha knd of condons a hyscal sore ges more rof. Wha s he omal adversng and romoon dscoun rcng sraegy of he hyscal sores when a LBS adversng a s mlemened? How does he varaons n rofs for he hyscal sores, and how o choose he LBS adversng sraegy under comeon? Suose ha here are wo geograhcally dfferenaed sores S, { AB, }, sellng homogeneous roducs wh rce, he un cos of roducon s c. Assume he sze of he oenal marke s normalzed o 1; he cusomers are connuously locaed a a lne and ndeed wh [ 0,1] and φ ( 0< φ < 1) rooron of he consumers who have a moble devce (such as smarhone GPS). The wo hyscal sores are locaed a wo end ons of he lne. If a cusomer doesn own a moble devce or are no aware of any LBS a adversemen, he robably ha he/she wll vs sore S s α ( αa + αb < 1 ). Ths knd of cusomers does no know recsely he sores locaons. They vs one of he wo sores arbrarly, or don vs any one of he sores. The cusomers vs a sore f hey receved radonal adversng or worh-of mouh nformaon. The uly funcon of he consumer who s no aware of he LBS adversng s defned as n δ U = v, where v s value of he roduc and δ s he cos for user o search and ravel from hs/her locaon o sore S. We assume he cos δ s a random varable wh a value drawn from he nerval [ 0,δ ], whou any LBS (ma) suor. For hose cusomers wh a moble devce, he benef ganed from he moble adversemen ncludes wo ars: dscoun couon and LBS suor. Denoe r A and r B ( 0< r < 1) as he rce dscoun of he a couon offered by sore A and B, resecvely. s he un of ravelng cos wh he suor of LBS, where < δ. The uly funcon of a consumer, who s aware of a adversng va a moble devce s defned as: U m m U A = v ra A, be aware of LBS adversng and urchases a sore A = m UB = v (1 ) rbb, be aware of LBS adversng and urchases a sore B To nform and arac he vs of cusomer, he sores have o some eer effor n mlemenng LBS adversng. β ( 0< β 1 ) s he LBS adversng level of sore S, whch sands for he marke coverage rae. In racce, he sores adverse n he assgned locaons by he moble adversng laforms, and could change he LBS adversemen range conngen on her own comeon sraegy. LBS adversemen rovdes he sore nformaon, free couon n echange for a small gf, he funcon o share benef or even o frends, o ence he consumers o vs. I can be nerreed as β of he consumers wh a moble devce wll be aware of S s LBS adversemen (nsall a and receve a romoon message) and vs he sore. Fgure 1 llusraes he LBS adversng cone. Followng he seng of he adversng effecveness eressed n he revous leraure (Soberman 2004, Ghosh & Sock, 2010 ), he cos for LBS adversng s conve whch mles ha he sore s ncreasngly dffcul o reach some arge 2 consumers. Secfcally, we assume ha sore has a cos of θβ ( θ > 0 ) f decded o reach β of he moble marke. The noaons used n he model are summarzed n Table 1. 4

5 Receve S A s LBS Ads Receve S B s LBS Ads Sore S B User wh a moble devce User whou a moble devce Sore S A Fgure 1.LBS adversng cone of comeng hyscal sores. Noaon S { } c β φ n U m U δ v α r θ z y π Table 1. Noaons used he model Descron AB,, wo hyscal sores S A, S B Produc rce The un cos of roducon LBS adversng level of sore, he consumers wll be aware ha offer of sore The rooron of he consumers has moble devce The uly funcon of consumer no be aware of LBS adversng and urchase a sore The uly funcon of consumer be aware of LBS adversng and urchase a sore The oal search cos whou locaon (ma) based suor The un ransacon cos wh locaon (ma) based suor Consumer reservaon value The rooron of he consumers no be aware of LBS adversng buy he roduc of sore The dscoun rovng by sore An LBS adversng cos arameer The demand of sore ha consumers no be aware of LBS adversng The demand of sore ha consumers be aware of LBS adversng (wo sores whou comeon) The demand of sore ha consumers be aware of LBS adversng (wo sores wh comeon) The rof of sore 5

6 3.1 Saus scenaro 1: None of he wo hyscal sores mlemens LBS adversng If boh of he wo hyscal sores don mlemen LBS adversng (rovde a ads), he cusomers wll vs sore S wh robably of α. Secfcally, he cusomers arbrarly choose a drecon o go as hey have no locaon nformaon of hem and he wo hyscal sores. Among hese cusomers who vsed sore S, z = ( v ) / δ rooron of hem wll urchase he roducs of S. We can reresen he rof funcons of he sore S as: π N α = z c. (1) Noe ha z s derved from he raonaly consran of he cusomers, whch should sasfy n U 0. In hs research, we assume he roduc rce has been re-deermned by he usream frms, such as franchsers, or deermned he sore based on he cos srucure and comeon envronmen he revous marke. Here, nsead of changng rce, we assume he hyscal sores rovde romoon dscoun o he consumers n adversng acves. 3.2 Saus scenaro 2: One of he wo hyscal sores mlemens LBS adversng Assume sore S deloys LBS adversng, whle sore cusomers who are no aware of LBS ads bu vss sore S dose no. The oal oulaon of S s 1 φ + φ 1 β α. The oulaon of cusomers who are aware of LBS ads and vs sore S wll be φβ. As he m consumers aware wll buy a roduc from sore S as long as U 0, he oal demand from he cusomers aware of S s LBS adversemen s = ( v r ) /. The oulaon of cusomers who vs sore resecvely formulaed as: S s 1 φ + φ 1 β α. The rof funcon of he wo hyscal sores can be (( 1 ) ( 1 )) z ( c) ( r c) 2 π = φ + φ β α + φβ θ β, (2) (( 1 ) ( 1 )) z ( c) π = φ + φ β α. (3) The sore S whch rovdes LBS ads has rof π, whch conans wo ars of revenue. One ar s he revenue from he cusomers who are no aware of LBS ads and whou any romoon dscoun; he oher ar s he revenue from he revenue of he cusomers who are aware of LBS adversemen and urchase wh a romoon dscoun. However, he sore S has he addonal cos n mlemenng LBS adversng, and rce dscoun o nduce consumers. The sore S whch does no ado LBS adversng has rof. Obvously, when he oulaon of consumers who are aware of LBS adversng from sore S ncreases, he sore S s rof wll decrease. For analycal convenence, we consder he wo sores have symmerc characerscs and assume z = ( v ) / δ = z, α = α = α, and = =. The sore S decdes he π 6

7 dscoun rae and LBS adversng level smulaneously o acheve he obecve of rofmamzaon. We can solve and oban v+ c r =, (4) 2 ( v c) 2 4φα z( c) φ β =. (5) 8θ 3.3 Saus scenaro 3: Boh of he wo hyscal sores mlemens LBS adversng The consumers who are aware of sore S s LBS ads bu no aware of S s LBS ads wll vs sore S. The oal oulaon of hem s φβ( 1 β ). In oal, φββ consumers are aware of he m m LBS ads from boh sores. These consumers comare he ne value of U A and U B, and vs he sore whch can make hem a hgher uly. In hs comeon suaon, he demand of sore S y = r r +. The oal oulaon of cusomers who have a moble devce bu are s ( ) /2 no aware of any LBS ads s φ( 1 β)( 1 β ). Accordng o he aforemenoned nformaon, f boh of he hyscal sores rovde LBS ads, we can reresen he rof funcon of he sores resecvely as (( 1 ) ( 1 )( 1 )) z ( c) ( 1 ) y ( r c) 2 π = φ + φ β β α + φβ β + φ ββ θ β (( 1 ) ( 1 )( 1 )) z ( c) ( 1 ) y ( r c) 2 π = φ + φ β β α + φβ β + φ ββ θ β We analyze a sequenal markeng game n whch boh comeng sores decde her dscoun rae and LBS adversng level smulaneously. Aferwards, consumers make a decson o vs and urchase a a sore. Snce boh sores wll choose he bes resonse dscoun rae and LBS adversng level o mamze her rofs. Smlarly, under he symmerc sore seng, by π π solvng = 0 and = 0, we have r r 3cββ + 4β 3ββ + 2β r =, (8) 3ββ 3cββ + 4β 3ββ + 2β r =. (9) 3ββ π π By solvng = 0 and = 0, we have β β ( 2 φ( 1 β ) + φβ ( r r + ) )( r c) 2 φ( 1 β ) αz( c) β =, (10) 4θ, (6).(7) 7

8 ( 2φ( 1 β) + φβ( r r + ) )( r c) 2φ( 1 β) αz( c) β =. (11) 4θ Solvng he equaons (8), (9), (10), (11) smulaneously, we have he equlbrum resuls: * c 8θ 4φα z c 2φ r = r = r = +, (12) z( c) ( z) φ φα + φα ( c) 4φ α z( c) + 16θφ φ φα z c + φα z c 4φ α z c + 16θφ * β = β = β = 4θ φ 2φα z c. (13) We fs eamne he mac of he rooron of he moble consumers on he LBS adversng β β level. By deducng, we oban ha > 0. φ φ PROPOSITION 1. When he rooron of he consumers havng a moble devce ncreases, he hyscal sores wll enhance her LBS adversng level. Prooson 1 suggess ha wh he marke growh of smar hones, he comeng hyscal sores wll eer more effor and nves more resource n mlemenng LBS adversng o arac consumers o vs her sores. In addon o eandng he locaon range of LBS adversng, hrough rovdng he benefs o consumers, such as value-added nformaon and eneranmen, oyful sore descron vdeos, free couon n echange for a small gf, he funcon o share benef or even o frends, he consumers have hgher ncenve o vs he sore. Wh he ncreasng growh of smar hones and moble Inerne connecon, moble adversng s ncreasng gradually. For eamle, Facebook s moble adversng revenue has reached 30% of oal adversng revenue n 2013 n he frs quarer, wh a growh rae of 7% from he revous quarer. As LBS ads are delvered o consumers when hey are close o he locaon of he sores, he moble adversng CTR (clck hrough raes) wll ncrease sgnfcanly. Therefore, LBS adversng are growng radly n many moble adversng laforms. For eamle, he CTR of McDonald s LBS ads, combned sore navgaon, reaches a 6.4%. The cosmecs comany CLINIQU, combnng he neares sore nformaon and share acves on Facebook no LBS adversng, has a CTR of 2%. Then, we eamne he mac of he rooron of he moble consumers on he romoon r r dscoun. By deducng, we oban ha < 0. φ φ PROPOSITION 2. When he rooron of he consumers havng a moble devce ncreases, he hyscal sores wll gve more dscouns o her cusomers aware of LBS adversemen. Produc rce dscoun s a benef o consumers ha are aware of LBS adversng. The hyscal sores delver he dscoun nformaon or couon o wll ence he consumers o vs her sore. Wh he ncreasng rooron of consumers has moble devce, he sores wll gve consumers hgher benefs as he ncreasng number of urchases wll suffcenly make u he loss from dscoun. 8

9 4 RSULTS AND IMPLICATUIONS As aforemenoned, he wo hyscal sores can choose wheher o mlemen LBS adversng o enhance he marke coverage or make no change (reman sae quo). We ne analyze he wo scenaros: (1) The sae quo s boh hyscal sores have no adoed LBS adversng. Wheher one of hem wll choose o be he frs mover o ado LBS adversng can be eamned by N comarng he sore s rof π (boh sores don ado LBS adversng) and π (only sore S ados LBS adversng). (2) The sae quo s one sore has already mlemened LBS adversng. Wheher he oher one wll become he second mover o ado LBS adversng can be eamned by comarng he sore s rof π (sore S has no adoed LBS adversng bu sore S has no) and π (boh sores have adoed LBS adversng). We use numercal analyss o ge a beer undersandng of he economc nsghs. Fgure 2 shows he enry sraegy for he hyscal sore o make a decson on LBS adversng adoon Two enered One enered No enry θ Fgure 2.The enry sraegy of he hyscal sores. Fgure 2 shows he sraegy ma on he hyscal sore s decson on he frs mover (lgh lus dark grey areas) and he enry sraegy of he second mover (dark grey area) n adong LBS adversng. As we can observe when rce s hgh and LBS adversng cos s low, he sores have hgher nenon o ado LBS adversng. In he gray regon, he sore wll ado LBS adversng and gan more rofs. In Fgure 2, he lgh gray regon (one enered) shows he suaon of only one sore mlemens he LBS adversng, n whch s romoon dscoun rae of he enran s r = ( c+ v) /2. We can fnd ha he hgher he rce, he lower romoon dscoun rae. Therefore, when he rce s hgh, he sore gves more benefs o he consumers, whch dmnshes he rof generaed from he LBS adversng marke. The rof of he sore whch ado he LBS adversng s π, ha conans he orgnal cusomers who buy a roduc whou 9

10 a romoon dscoun and he consumers wh romoon dscoun. When he LBS adversng cos s low, he sore wll eer a hgher adversng level o enlarge he demand of cusomers wh a moble devce. In Fgure 2, he dark gray regon (wo enered) shows he enry sraegy of he wo hyscal sores n adong LBS adversng. Comarng he gray blocks of Fgure 2, a he same rce level, he LBS adversng cos n he dark gray regon s lower han ha n he lgh gray regon. When here are wo sores mlemenng LBS adversng n he marke, he comeon becomes more nense, s harder for hyscal sores o make more rof from he LBS cusomers. r 1 β r (only r (nvadng one sore enry) wh LBS ads) β (only (nvadng one sore enry) wh LBS ads) r (wo r (defendng sores wh enry) LBS ads) β (wo (defendng sores wh enry) LBS ads) (a) The mac of on romoon dscoun (b) The mac of on adversng level β Fgure 3.The mac of rce on dscoun and LBS adversng level. We analyze and comare he adversng levels and romoon dscouns of LBS adversng sraeges under dfferen marke sauses. Fgure 3(a) shows he mac of rce on romoon dscoun under he saus scenaros n whch only one sore mlemens and boh wo sores mlemen LBS adversng. In he same rce level, he romoon dscoun rae when only one sore mlemens LBS adversng s hgher han he romoon dscoun rae when wo sores mlemen LBS adversng. The frs mover does no face comeon n mlemenng he LBS adversng sraegy. Therefore, less romoon dscoun s rovded. However, when here are wo sores mlemenng LBS adversng, he marke becomes more comeve, whch forces he sores o gve more romoon o arac consumers. Comarng he wo lnes of Fgure 3(b), he LBS adversng level n he marke saus n whch only one sore mlemenng LBS ads s hgher han he adversng level n he marke saus n whch boh wo sores mlemen LBS ads. The resul reveals ha when a sore faces less comeon, he sore wll eer more effor n ncreasng he LBS adversng level o arac consumers o vs, nsead of rovdng more romoon dscoun o consumers. 5 CONCLUSION LBS adversng brngs he benef of nformaon awareness, romoon dscoun, search and ravel suor for he cusomers and new marke ooruny for he hyscal sores. In hs aer, ulzng he mehodology of game heorec and economc modellng, we analyze he romoon dscoun sraegy and LBS adversng level for comeng wo hyscal sores. The mac of 10

11 LBS on he hyscal sores s eamned n varous yes of comeve envronmens. We analyze enry sraegy of a hyscal sore n mlemenng LBS adversng when he frm has he ooruny o be he frs mover or have o face he challenge o be he second mover. We fnd ha he hyscal sores wll adverse more bu gve hgher dscouns o her cusomers when he rooron of consumers wh a moble devce s ncreasng. The rce and LBS adversng cos wll affec he sores decson on he adoon of LBS adversng. We fnd ha he economc nenon o ado LBS adversng s hgher for a frs mover han a second mover. There are several ssues whch can be furher suded. Frs, we assume ha he robably of a cusomer aware of a sore s LBS add s he same. I would be neresng o develo a model ha he cusomers have dfferen robably of beng aware. Second, he roduc rce s redeermned n our model. The decson of roduc rce can be furher analyzed by consderng dfferen suly chan scenaros. Thrd, he role of radonal adversng can be ncororaed no he model. I would be neresng o desgn he mng sraegy of radonal and LBS adversng. Fourh, wh he suor of GPS and LBS, he ransacon cos s reduced; we can nvesgae he nfluence of reduced ransacon cos on sore s LBS adversng level and rofs. References Dey, Annd K. (2001). Undersandng and usng cone. Personal and ubquous comung, 5(1), 4-7. Dhar, Subhankar, & Varshney, Ukar. (2011). Challenges and busness models for moble locaon-based servces and adversng. Communcaons of he ACM, 54(5), emarkeer. (2013). Adversers Begn o Navgae he Moble Landscae. Rereved November 24, 2013, from h:// Landscae/ Garner. (2013). Garner Says Worldwde Moble Adversng Revenue o Reach $11.4 Bllon n Rereved Novermber 24, 2013, from h:// Ghosh, Bkram, & Sock, Ael. (2010). Adversng effecveness, dgal vdeo recorders, and roduc marke comeon. Markeng Scence, 29(4), InMob. (2013). Aud leverages InMob's 'locaon-enabled ads' o drve oenal consumers o local car dealers. Rereved December 5, 2013, from h:// Iyer, Ganesh, Soberman, Davd, & Vllas-Boas, J Mguel. (2005). The argeng of adversng. Markeng Scence, 24(3), Shoab, Deema Adeeb Al, & Rassan, Iehab A Al. (2012). Moble Adversng Usng Locaon Based Servces. Paer resened a he Inerne Oerang Sysems (ICIOS), 2012 I Frs Inernaonal Conference on. Shy, Oz. (1996). Indusral organzaon: heory and alcaons: MIT Press. Soberman, Davd A. (2004). Research noe: Addonal learnng and mlcaons on he role of nformave adversng. Managemen Scence, 50(12), Trole, Jean. (1988). The Theory of Indusral Organzaon. Cambrdge, Mass: MIT Press. Varshney, U. (2008). Busness Models for Moble Commerce Servces: Requremens, Desgn, and he Fuure. IT Professonal, 10(6), Von Inc. Rereved December 5, 2013, from h:// Zhang, Kafu, & Kaona, Zsol. (2012). Coneual adversng. Markeng Scence, 31(6),