From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising

Francesco Decarolis and Gabriele Rovigatti

No 13897, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyzes the impact of intermediary concentration on the allocation of revenues in online platforms. We study sponsored search documenting how advertisers increasingly bid through a handful of specialized intermediaries. This enhances automated bidding and data pooling, but lessens competition whenever the intermediary represents competing advertisers. Using data on nearly 40 million Google keyword auctions, we first apply machine learning algorithms to cluster keywords into thematic groups serving as relevant markets. Using an instrumental variable strategy, we estimate a decline in the platform's revenues of approximately 11 percent due to the average rise in concentration associated with intermediary M&A activity.

Keywords: Buyer power; Concentration; Online advertising; Platforms; Sponsored search (search for similar items in EconPapers)
JEL-codes: C72 D44 L81 (search for similar items in EconPapers)
Date: 2019-07
New Economics Papers: this item is included in nep-big, nep-com, nep-ict and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Journal Article: From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising (2021)
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