An analytical model for comparing the profitability of competing online marketing channels: Search engine marketing versus e-commerce marketplace

Digital marketing offers entrepreneurs a variety of alternatives to market globally and generate revenues. Recent studies show that there is a strong research interest in developing analytical models to increase the firms’ profit, by considering either key variables of specific advertising forms in isolation or cross-channel effects of online and offline channels. This article proposes a new analytical model, which assumes a trade-off between concurrent online marketing channels. Despite their different models, search engines and e-commerce platforms can be seen as competing in the same market when they are targeting the same set of consumers. Accordingly, advertisers need to constantly analyse which of the online activities perform better and why. The proposed model aims at capturing the main parameters a firm should carefully master in order to assess the effectiveness of alternative online channels in a comparative perspective, by suggesting the maximum cost per click that a firm should pay to benefit from search engine marketing, as much as from e-commerce platform.