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The Online Advertising Industry: Economics, Evolution, and Privacy

Journal of Economic Perspectives, Forthcoming

41 Pages Posted: 16 Apr 2009  

David S. Evans

Global Economics Group; University College London

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)

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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