Currently, the predominant pricing plan for the search engine (SE) advertising services in a proprietary electronic market is a flat fee (FF) pricing. These services have faced the challenge of customer attrition recently since FF pricing results in the inequality of service surplus among subscribers. A more sustainable and profitable pricing model would be to distinguish advertising resources by providing an additional usage-based pricing for certain user groups to transfer the service surplus among subscribers. We conceive a hybrid model integrating Pay-Per-Click (PPC) pricing into FF pricing. This proposed scheme can offer an incentive-compatible mechanism to attract more subscribers by relieving the inequity of service surplus, and eventually result in the increasing revenue of service providers.
Li, Pei; Dai, Jun; and Lin, Zhangxi, "Integrating PPC and Flat Fee Pricing Schemes to Optimize the Internal Search Engine Revenue in the Electronic Market" (2010). ICEB 2010 Proceedings. 82.