It's Showtime! Livestreaming E-commerce and Optimal Promotion Insertion Policy

When social commerce collides with video, livestreaming e-commerce has gained tremendous success as a new form of business model over the past few years. Compared with traditional e-commerce, livestreaming e-commerce better engages the attention of viewers through providing product endorsement in more vivid ways and interacting with viewers more inter-personally. Prevalent research has studied how viewers' attributes and personal characteristics of livestreaming hosts affect viewer engagement and consequently sales. However, there has been scarce research examining the effect of exogenous stimulus-driven factors (i.e., social cues such as promotion coupons) on the profit of the livestreaming platform. We model the continuous evolvement of viewer aggregate engagement level in the livestreaming platform with a geometric Brownian motion and investigate the optimal timing and strategy of promotion insertion policy. Our findings reveal that the optimal promotion insertion policy for the livestreaming platform is a threshold policy that involves a trigger threshold and a target level. Specifically, the platform should release the promotion when the engagement level drops to the threshold and the promotion depth should increase viewer engagement to the target level. In practice, the promotion planning process is constrained by various business rules, such as the promotion depth being limited by a discrete set. Nevertheless, we analytically demonstrate that a simple threshold policy is still the optimal policy under this more complex scenario. Finally, to examine the effectiveness of our proposed policy, we compare it with prevalent industry practices (i.e., preroll, midroll, mix, and random strategy) through numerical analyses. The result shows that the proposed policy outperforms prevailing ones significantly in generating profit for the livestreaming platform