Winner: ad platform.
Except that they do have a choice.
Suppose there are five competitors. Everybody knows Steve is going to buy a BMW 3 Series. The margin is $5000. Assuming everyone else is going to do what you're going to do, how much does it make sense to bid to advertise to Steve? If you bid $1000, you have a one in five chance of making a $5000 margin. If you bid $5000, you have a one in five chance of making $5000.
So the optimal amount to bid is $0, because you have the same one in five chance at $5000 if everyone bids $0 than if everyone bids $1000 or $5000, but then you have a $1000 expected value rather than a $0 or $-4000 one.
Now suppose the others aren't using the same utility function as you and so may bid a different amount and you get a bidding war. So the first thing that happens is somebody bids $100 expecting to make $5000 -- bully for them, until the second one bids $200. Everyone raises their bid to $1000 because that's what a 20% chance at $5000 is worth. If one of the competitors drops out, the others will raise their bid to $1250 because now it's a 25% chance.
Which means there's never any profit in it for the advertiser. If anybody plays then at least one competitor will retaliate and everybody loses a total of $5000 to the ad platform. If nobody plays, everybody gets an expected value of $1000. Being the first to quit costs you nothing, but being the first to play costs you and each of your competitors $1000. Who is going to play this game?
In reality what happens is marketing runs an ad for $3000 offering a $1000 incentive, Steve makes the purchase, and making gets to (possibly correctly) claim they netted $1000 in sales.
Those marketing people want to keep their jobs, so they are going to work hard to justify their existence!
No, I am assuming that advertising works the same for everyone. If there are five dealers and fifty customers and with no advertising each dealer gets ten customers, then with each dealer spending $50,000 on targeted advertising, each dealer still gets ten customers. When each dealer spends the same amount they each get the same benefit, so they still split the existing customers five ways.
Probably the clearest example I can think of is doing a no-adblock Google Search for "Coca-Cola." The first result is an ad, put out by the Coca-Cola Company. This might not seem to make any sense, since the first non-ad result is an identical link to the same website, but imagine what Cott Corporation or PepsiCo would do if they could by the first result for their competitor...
If I have a $20 margin, I am better off giving Google $15 and getting an incremental $5 profit than not advertising. Even worse if my customers have a lifetime value of $50 it may make sense to give Google $45 and not see a return from my spend until years down the road while Google gets the $45 right now.
