Rational spamming

Abstract

Advertising on social media faces a new challenge as consumers can actively choose which advertisers to follow. Tracking company accounts, owned by 93 TV shows on the most popular tweeting website in China, provides evidence that firms advertise intensively, although doing so appears to drive followers away. An analytical model suggests that consumers with limited attention may rationally choose to unfollow a firm. This happens if consumers already know enough about the firm's quality and if the firm advertises too intensely. However, firms might still find intensive advertising the optimal strategy - if a firm is perceived as having a lesser quality offering, it wants to advertise aggressively to change consumers' beliefs about its quality; if a firm is perceived as having a higher quality offering, it also wants to advertise intensively, but in an effort to crowd-out advertising messages from its competitors.