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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

David S. Evans

Global Economics Group; University College London

Date Written: May 9, 2008

Abstract

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

Suggested Citation

Evans, David S., The Economics of the Online Advertising Industry (May 9, 2008). Review of Network Economics, Vol. 7, No. 3, September 2008. Available at SSRN: https://ssrn.com/abstract=1086473

David S. Evans (Contact Author)

Global Economics Group ( email )

111 Devonshire St.
Suite 900
Boston, MA 02108
United States

University College London ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

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