Optimal Diffusion Strategy of Advertising using a Facebook Application

摘要

In 2007, Facebook made a momentous decision to open its platform for independent applications. After that, numerous applications are designed and deployed. From a business perspective, a Facebook application has the characteristics of low development cost and strong word-of-mouth effect, which provide an ideal alternative to traditional advertising format. This paper reveals the diffusion pattern of three leading Facebook applications and concludes that the classic Bass diffusion model can be applied to the diffusion process. Based on Bass model, we further propose a diffusion strategy of advertising using a Facebook application. We find that for a given amount of advertising budget, to achieve a maximum percentage of user installations out of the target population of the application, there exists a unique solution to allocate the budget optimally between activities promoting innovation and imitation effects. Numerical examples are provided to illustrate the optimal solution.