The Online Advertising Industry: Economics, Evolution, and Privacy

Journal of Economic Perspectives, Forthcoming

41 Pages Posted: 16 Apr 2009

See all articles by David S. Evans

David S. Evans

Market Platform Dynamics; Berkeley Research Group, LLC

Date Written: April 10, 2009

Abstract

Online advertising accounts for almost 9 percent of all advertising in the United States. This share is expected to increase as more media is consumed over the internet and as more advertisers shift spending to online technologies. The expansion of internet-based advertising is transforming the advertising business by providing more efficient methods of matching advertisers and consumers and is transforming the media business by providing a source of revenue for online media firms that compete with traditional media firms. The precipitous decline of the newspaper industry is one manifestation of the symbiotic relationship between online content and online advertising. Online-advertising is provided by a series of interlocking multi-sided platforms (also known as two-sided markets) that facilitate the matching of advertisers and consumers. These intermediaries increasingly make use of detailed individual data, predictive methods, and matching algorithms to create more efficient matches between consumers and advertisers. Some of their methods raise public policy issues that require balancing providing consumers more valuable advertising against the possible loss of valuable privacy.

Keywords: Advertising, Online Advertising

JEL Classification: M3, M37

Suggested Citation

Evans, David S., The Online Advertising Industry: Economics, Evolution, and Privacy (April 10, 2009). Journal of Economic Perspectives, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1376607

David S. Evans (Contact Author)

Market Platform Dynamics ( email )

140 South Dearborn St.
Chicago, IL 60603
United States

Berkeley Research Group, LLC ( email )

99 High St.
Boston, MA 02110
United States

HOME PAGE: http://davidsevans.org

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