Advertisements follow you everywhere. From social media to online shopping, we see more and more websites using online advertisements to generate revenue from businesses who are trying to reach the ever-growing online audience. They can track your history to great lengths to provide you with 'what you want to see'. Social networking giants tapped into the profit-churning machine long ago, an example being Facebook in 2012. It obtained a total revenue of over $12 billion in 2015, most of which was derived from advertising. More recently, Snapchat introduced adverts - now almost half its revenue is derived from it. People have long found pop-ups and adverts a pain, yet more companies (such as Reddit) are following suit in implementing them. Therefore, I have come to ask a question: is advertising beneficial for all online websites?
I realised the question can be answered using game theory. If you are not yet familiar with the concept of game theory, don’t worry – A Rational Econ is working on a guide to it. For now, just see if you can follow. The payoff matrix below is used to illustrate the options of two large players in the social media industry - Firm A (player 1) and Firm B (player 2). Each box shows the revenue players get when they choose a particular strategy, with the first number (top right) indicating the payoff to player 1 and the second number (bottom left) the payoff player 2 would receive. Let’s assume that for these two businesses advertising increases revenue; therefore, when both players advertise, the total payoff is higher than when only one or neither advertise. Although adverts go against consumer’s best interest, there is high demand for it on social media from businesses as they have the ability to reach a massive audience. Thus, as soon as either form of social media starts using adverts, businesses will pay money to promote on the platform.
I know that just about everyone in their lives has had to learn about Pythagoras’ theorem. Although the theorem is an interesting thing to discuss in and of itself, I also enjoy learning about the people who derived these equations, and in this case, Pythagoras.
If we jump back in time to approximately 569 BC, a legend was born by the name of Pythagoras, in Samos, Greece. Little was known of Pythagoras’ early life and, therefore, I will focus on the more important milestones in his life. Around the year 518BC, he settled down in the Greek town of Cortona, in southern Italy. During his time in Cortona, he set up a religion and philosophy school, where he mainly taught his students the wonders of mathematics.