Intermediaries in the Online Advertising Market

Anna D’Annunzio () and Antonio Russo ()
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Anna D’Annunzio: Toulouse Business School, 31068 Toulouse, France
Antonio Russo: Department of Economics, University of Sheffield, Sheffield S1 4DT, United Kingdom

Marketing Science, 2024, vol. 43, issue 1, 33-53

Abstract: Most of the ads displayed by digital publishers are sold via intermediaries, which have large market power and reportedly allocate the ads in an opaque way. We study the incentives of an intermediary to disclose consumer information to advertisers when auctioning ad impressions. In turn, we study how disclosure affects the incentives of publishers to outsource the sale of their ads to an intermediary and relate these incentives to the extent of consumer multihoming, the competitiveness of advertising markets, and the ability of platforms to profile consumers. We show that disclosing information that enables advertisers to optimize the allocation of ads on multihoming consumers is profitable to the intermediary only if advertising markets are sufficiently thick. When markets are thin, retaining information on consumers’ type is superior to retaining information on exposure to ads. Even though consumers multihome, the publishers may be worse off by outsourcing to the intermediary, in particular if they operate in thin advertising markets. Finally, we study how the intermediary responds to policies designed to enhance transparency and consumer privacy, and the implications of these policies for the online advertising market.

Keywords: online advertising; intermediary; multihoming; privacy; transparency (search for similar items in EconPapers)
Date: 2024
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