Extension of the Sethi Model to the Advertising of Digital Products

In this paper, a model is formulated that modifies the Sethi model of advertising optimization to incorporate unique features present in the mobile game space. Although the optimization of advertising in traditional industries has been thoroughly studied, the optimization models used lack sufficient predictive power for several emerging market sectors. For the free-to-play video game industry in particular, there are issues that arise in the form of uncertain revenue from users and the effect of the ranking systems used for these games. This paper compares the modified and original Sethi models and it is shown how little or no advertising in the video game industry can still result in a large market share given sufficient virality parameters for the game.