Edited by Joseph E. Harrington Jr and Yannis Katsoulacos
Chapter 9: Issues in Online Advertising and Competition Policy: A Two-sided Market Perspective
Emilio Calvano and Bruno Jullien 9.1 INTRODUCTION Online advertising accounted for $26.04 billion of the total US advertising pie in 2010, with annual growth rates in the double digits. In the past few years the Internet has continued to grow in significance when compared to other ad-supported media. In 2010, Internet advertising surpassed advertising revenues in newspapers. Advertising in general and online advertising in particular involves a large diversity of actors. The main actors on the supply side of the market are search engines and portals (for example, Google, Yahoo), online news outlets (for example, cnn.com, nyt.com), user generated content sites (YouTube, blogs), social networks (Facebook, Google+), and e-commerce outlets (eBay, Amazon).1 What makes online advertising attractive is the wide range of new products and services offered. Sponsored search ads tie advertising messages to specific keyword searches. Sponsors can thus be matched to consumers who showed an interest in particular products/topics. Behavioral targeting and re-targeting techniques allow the use of information collected on an individual’s browsing behavior, such as the pages he has visited or the searches he has made to select which advertisements to display to that individual. Performance-based pricing allows charging as a function of the outcome of the campaign. Cost per thousand impressions (CPM), cost per click-through (CPT), or cost per sale (CPS) are only some of the schemes employed by online outlets (often called ‘platforms’ in what follows) to attract advertisers. Despite the wealth of innovation, the economics of online advertising is not fundamentally different...
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