Winners, Losers, and Facebook: The Role of Social Logins in the Online Advertising Ecosystem
60 Pages Posted: 31 Mar 2016 Last revised: 20 Aug 2016
Date Written: August 1, 2016
Many websites and online services allow users to register and authenticate with their social network account. These social logins, such as "Log in with Facebook", improve a website's user experience and therefore enjoy great popularity among content providers (CPs) and users alike. Moreover, they also enable the social network and the CPs to share data, which individually improves their ability to place targeted advertising.
In this paper we develop a game-theoretic model that offers a microfoundation and characterization on how social logins affect CPs' competition for users, as well as CPs' competition with the social network in the advertising market. This enables us to examine the incentives and fundamental trade-offs that drive adoption decisions of social logins as well as their profitability for the social network and the CPs. Whereas there are situations where all parties are mutually better off, we find that CPs may implement a social login even in cases where this decision ultimately makes them worse off. That is, the voluntary adoption of the social login may yield a prisoner's-dilemma-like situation for the CPs. Furthermore, there may also arise situations where the social network does not offer the social login although it would be beneficial to consumers. In particular, the social network has an incentive to discriminate between CPs with respect to which CPs are allowed to employ the social login on their websites.
In this context, the use and provisioning of social logins are also of policy relevance as they resemble features of the open access and net neutrality debates in the context of the provision of telecommunications and Internet access services. While these debates are concerned with discrimination practices that a network provider with market power can exercise in its network, the policy question related to social logins is concerned with the discrimination practices that a content provider with market power (possibly like Facebook) can exercise over its service.
Keywords: social login, advertising markets, targeted advertising, data sharing, coopetition, data neutrality
JEL Classification: L13, L15, L86
Suggested Citation: Suggested Citation