The Attention Economy of Online Advertising

48 Pages Posted: 4 Apr 2019 Last revised: 24 Jul 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: July 23, 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 face an interesting tradeoff: on the one hand, they are prone to over-advertise (similar to double marginalization); on the other hand, they tend to misallocate ads across sites (a distortion we call misplacement). Standard solutions to the double marginalization problem, such as adding competition among certain sites, make the misplacement problem more severe. This tradeoff is important for news aggregators and social networks, as it affects their decisions whether to link to external content providers or to expand the amount of content they offer by themselves. Understanding these incentives helps to inform the current debate regarding the concentration of influence among a small set of online platforms.

Keywords: Platforms, Advertising, Misplacement, Market Power

JEL Classification: D21, D40, L23, L42, L86, M37

Suggested Citation

White, Alexander and Jain, Kamal, The Attention Economy of Online Advertising (July 23, 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 )

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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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