Product Market Definition in Online Search and Advertising

Abstract

One of the thorniest questions which competition authorities are increasingly confronted with is the extent to which traditional market definition tools can be used to assess the competitive dynamics of today’s knowledge-intensive, user-based internet search business. The question is challenging for two main reasons: (1) the peculiarities of two-sided markets; and (2) the key role of user data in online search and advertising. This article addresses these issues individually: starting from a description of the interrelationship between online search and advertising, it highlights the role of user data as the most valuable asset for future growth in the industry, a potential barrier to entry and a cause of switching cost. Finally, it concludes with suggestions for product market definition.