The Economics of the Online Advertising Industry

David Evans ()

Review of Network Economics, 2008, vol. 7, issue 3, pages 359-391

Abstract: Internet-based technologies are revolutionizing the stodgy $625 billion global advertising industry. There are a number of public policy issues to consider. Will a single ad platform emerge or will several remain viable? What are the consequences of alternative market structures for a web economy that is increasingly based on selling eyeballs to advertisers? This article describes the online advertising industry. The industry is populated by a number of multi-sided platforms that facilitate connecting advertisers to viewers. Search-based advertising platforms, the most developed of these, have interesting economic features that result from the combination of keyword bidding by advertisers and single-homing.

Keywords: network externalities; network effects; software; platforms (search for similar items in EconPapers)
Date: 2008
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