The Value of External Data for Digital Platforms: Evidence from a Field Experiment on Search Suggestions

36 Pages Posted: 12 Jun 2023

See all articles by Xiaoxia Lei

Xiaoxia Lei

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Yixing Chen

Mendoza College of Business, University of Notre Dame

Ananya Sen

Carnegie Mellon University

Date Written: May 18, 2023

Abstract

Firms increasingly leverage external data with an aim to unlock improvements in their offerings, but it is challenging to measure the value of external data. Collaborating with a technology company in China, we analyze a field experiment where we manipulated access to a leading search engine’s application programming interface (API) to measure the causal impact of such data access on the click-through rate (CTR) of the focal company’s search suggestions. We report three main findings: First, compared to the baseline with access to the API, API removal leads to a 4.6% decrease in the average CTR of search suggestions. Second, the negative effect due to API removal is more prevalent among heavy users, and it is driven by both mainstream and niche content. Third, the negative effect becomes less negative over time with the absolute magnitude in the longer term being half as much as what we would have obtained with a short-term experiment. We provide suggestive mechanism evidence of the longer-term effect: the focal company’s reliance on the leading search engine’s data limits the development of its algorithmic system based on its internal data. This research informs managers of whether and how the market leader’s data affects a smaller player’s product performance. It further sheds light on policies such as the Digital Markets Act that proposes data sharing by large digital platforms, as well as a recent debate on whether big data undermines market competition.

Suggested Citation

Lei, Xiaoxia and Chen, Yixing and Sen, Ananya, The Value of External Data for Digital Platforms: Evidence from a Field Experiment on Search Suggestions (May 18, 2023). Available at SSRN: https://ssrn.com/abstract=4452804 or http://dx.doi.org/10.2139/ssrn.4452804

Xiaoxia Lei

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200030
China

Yixing Chen

Mendoza College of Business, University of Notre Dame ( email )

396 Mendoza College of Business
Notre Dame, IN 46556
United States

Ananya Sen (Contact Author)

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
290
Abstract Views
1,449
Rank
193,889
PlumX Metrics