Technology Licensing by Advertising Supported Media Platforms: An Application to Internet Search Engines

Geza Sapi () and Irina Suleymanova

The B.E. Journal of Economic Analysis & Policy, 2011, vol. 11, issue 1, 51

Abstract: We develop a duopoly model with advertising supported platforms and analyze incentives of a superior firm to license its advanced technologies to an inferior rival. We highlight the role of two technologies characteristic for media platforms: the technology to produce content and to place advertisements. Licensing incentives are driven solely by indirect network effects arising from the aversion of users to advertising. We establish a relationship between licensing incentives and the nature of technology, the decision variable on the advertiser side, and the structure of platforms’ revenues. Only the technology to place advertisements is licensed. If users are charged for access, licensing incentives vanish. Licensing increases the advertising intensity, benefits advertisers and harms users. Our model provides a rationale for technology-based cooperations between competing platforms, such as the planned Yahoo-Google advertising agreement in 2008.

Keywords: two-sided markets; advertising; technology licensing (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.2202/1935-1682.2652 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
Working Paper: Technology licensing by advertising supported media platforms: An application to internet search engines (2011)
Working Paper: Beef up Your Competitor: A Model of Advertising Cooperation between Internet Search Engines (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejeap:v:11:y:2011:i:1:n:37

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejeap/html

DOI: 10.2202/1935-1682.2652

Access Statistics for this article

The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

More articles in The B.E. Journal of Economic Analysis & Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().