The Attention Economy of Online Advertising

48 Pages Posted: 4 Apr 2019

See all articles by Alexander White

Alexander White

Tsinghua University - School of Economics & Management

Kamal Jain

Microsoft Corporation - Microsoft Research New England

Multiple version iconThere are 2 versions of this paper

Date Written: March 31, 2019

Abstract

Internet users often surf to multiple websites in order to accomplish a single task. When this happens, do these different sites face the right incentives when choosing their advertising policies? We build a model showing that websites are prone both to over-advertise and to misallocate ads across sites. The former problem is analogous to "double marginalization," in price-setting models, whereas the latter, novel distortion, "misplacement," arises because users' attention is not fungible in the same way that money is. Moreover, we show that these two phenomena give rise to a tradeoff: adding competition among certain sites in order to eliminate double marginalization tends to worsen misplacement. We show that this tradeoff plays an important role in the choice facing platforms such as news aggregators of whether to follow a strategy of linking to other sites that produce news or to acquire such content for themselves.

Keywords: Economics of the Internet, Online Advertisement, Two-Sided Markets, Complements, Misplacement, Attention

JEL Classification: L13, L23, D43, M37, L86

Suggested Citation

White, Alexander and Jain, Kamal, The Attention Economy of Online Advertising (March 31, 2019). Available at SSRN: https://ssrn.com/abstract=3363647 or http://dx.doi.org/10.2139/ssrn.3363647

Alexander White (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Mailbox A-44
Weilun Building
Beijing, 100084
China

HOME PAGE: http://alex-white.net

Kamal Jain

Microsoft Corporation - Microsoft Research New England ( email )

One Memorial Drive, 14th Floor
Cambridge, MA 02142
United States

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