The Economics of the Online Advertising Industry
Review of Network Economics, Vol. 7, No. 3, September 2008
46 Pages Posted: 25 Jan 2008 Last revised: 19 Jun 2014
Date Written: May 9, 2008
Online advertising has grown rapidly and accounts for about 7% of US advertising spending. It is projected to increase sharply as more consumers spend time online on their personal computers and as additional devices such as mobile phones and televisions are connected to the web. This article describes how the online advertising industry works. The industry is populated by a number of multisided platforms that singly or in combination facilitate connecting advertisers to viewers. Search-based advertising platforms, the most well developed of these, has several interesting economic features that result from the combination of keyword bidding by advertisers and single-homing.
Keywords: Online Advertising, Advertising, Network Effects
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