Value Creation by Ad-Funded Platforms

Gregor Langus and Vilen Lipatov

No 9525, CESifo Working Paper Series from CESifo

Abstract: We identify features of interactions on online platforms that make an ad-funded business model attractive for the platform, but also for consumers. We then show that ad-funded platforms heavily rely on data for their ability to create value for their users. Formally, we show that data restrictions may trigger a switch away from ad-funded to fee-funded model, resulting in a loss of consumer welfare. We also argue that restricting the effort to increase data quality weakens competition to the detriment of consumers.

Keywords: ad-funded business model; data aggregation restrictions; targeted advertising; platform competition; merchant competition; transaction costs (search for similar items in EconPapers)
JEL-codes: K21 L22 L40 M37 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-com, nep-ind, nep-law, nep-mic, nep-pay and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9525

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