Beef up Your Competitor: A Model of Advertising Cooperation between Internet Search Engines

We propose a duopoly model of competition between internet search engines endowed with different technologies and study the effects of an agreement where the more advanced firm shares its technology with the inferior one. We show that the superior firm enters the agreement only if it results in a large enough increase in demand for advertising space at the competing .rm and a relatively small improvement of the competitor's search quality. Although the superior firm gains market share, the agreement is beneficial for the inferior firm, as the later firm's additional revenues from a higher advertising demand outweigh its losses due to a smaller user pool. The cooperation is likely to be in line with the advertisers' interests and to be detrimental to users' welfare.Search Engine, Two-Sided Market, Advertising, Strategic Complements, Technology

Information Gatekeepers: Paid Placement and Competition

Information gatekeepers such as Internet search engines and shopbots play a crucial role in the information society. Recently, such gatekeepers have begun implementing a paid placement strategy, where some content providers are given, in return for a placement fee, prominent positioning in response to user queries. Generally, users have disutility toward the bias created by paid placement, and the search engine can manipulate the placement strategy to affect usersí disutility. We analyze the gatekeeperís tradeoff between revenue from paid placement and the potential loss in advertising revenue from the loss of credibility. In the optimal paid placement strategy, an increase in the gatekeeperís quality of service allows it to improve profits from paid placement, moving it closer to the ideal. However, an increase in the advertising rate motivates the gatekeeper to increase market share by reducing further its reliance on paid placement and fraction of paying providers. When there is competition between search engines of identical quality, they will choose the same bias level. For heterogeneous search engines with different qualities, the equilibrium outcome depends largely on the usersí cognitive or other limitations on the number of search results they effectively consider

Dominant Search Engines: An Essential Cultural & Political Facility

When American lawyers talk about essential facilities, they are usually referring to antitrust doctrine that has required certain platforms to provide access on fair and nondiscriminatory terms to all comers. Some have recently characterized Google as an essential facility. Antitrust law may shape the search engine industry in positive ways. However, scholars and activists must move beyond the crabbed vocabulary of competition policy to develop a richer normative critique of search engine dominance. In this chapter, I sketch a new concept of essential cultural and political facility, which can help policymakers recognize and address situations where a bottleneck has become important enough that special scrutiny is warranted. This scrutiny may not always culminate in regulation. However, it clearly suggests a need for publicly funded alternatives to the concentrated conduits and content providers colonizing the web

Is Google the next Microsoft? Competition, Welfare and Regulation in Internet Search

Internet search (or perhaps more accurately `web-search') has grown exponentially over the last decade at an even more rapid rate than the Internet itself. Starting from nothing in the 1990s, today search is a multi-billion dollar business. Search engine providers such as Google and Yahoo! have become household names, and the use of a search engine, like use of the Web, is now a part of everyday life. The rapid growth of online search and its growing centrality to the ecology of the Internet raise a variety of questions for economists to answer. Why is the search engine market so concentrated and will it evolve towards monopoly? What are the implications of this concentration for different `participants' (consumers, search engines, advertisers)? Does the fact that search engines act as `information gatekeepers', determining, in effect, what can be found on the web, mean that search deserves particularly close attention from policy-makers? This paper supplies empirical and theoretical material with which to examine many of these questions. In particular, we (a) show that the already large levels of concentration are likely to continue (b) identify the consequences, negative and positive, of this outcome (c) discuss the possible regulatory interventions that policy-makers could utilize to address these

Trusting (and Verifying) Online Intermediaries\u27 Policing

All is not well in the land of online self-regulation. However competently internet intermediaries police their sites, nagging questions will remain about their fairness and objectivity in doing so. Is Comcast blocking BitTorrent to stop infringement, to manage traffic, or to decrease access to content that competes with its own for viewers? How much digital due process does Google need to give a site it accuses of harboring malware? If Facebook censors a video of war carnage, is that a token of respect for the wounded or one more reflexive effort of a major company to ingratiate itself with the Washington establishment? Questions like these will persist, and erode the legitimacy of intermediary self-policing, as long as key operations of leading companies are shrouded in secrecy. Administrators must develop an institutional competence for continually monitoring rapidly-changing business practices. A trusted advisory council charged with assisting the Federal Trade Commission (FTC) and Federal Communications Commission (FCC) could help courts and agencies adjudicate controversies concerning intermediary practices. An Internet Intermediary Regulatory Council (IIRC) would spur the development of expertise necessary to understand whether companies’ controversial decisions are socially responsible or purely self-interested. Monitoring is a prerequisite for assuring a level playing field online

Platform Neutrality: Enhancing Freedom of Expression in Spheres of Private Power

AbstractTroubling patterns of suppressed speech have emerged on the corporate internet. A large platform may marginalize (or entirely block) potential connections between audiences and speakers. Consumer protection concerns arise, for platforms may be marketing themselves as open, comprehensive, and unbiased, when they are in fact closed, partial, and self-serving. Responding to protests, the accused platform either asserts a right to craft the information environment it desires, or abjures responsibility, claiming to merely reflect the desires and preferences of its user base. Such responses betray an opportunistic commercialism at odds with the platforms’ touted social missions. Large platforms should be developing (and holding themselves to) more ambitious standards for promoting expression online, rather than warring against privacy, competition, and consumer protection laws. These regulations enable a more vibrant public sphere. They also defuse the twin specters of monopolization and total surveillance, which are grave threats to freedom of expression.</jats:p

A simple model of search engine pricing

We present a simple model of how a monopolistic search engine optimally determines the average quality of firms in its search pool. In our model, there is a continuum of consumers, who use the search engine’s pool, and there is a continuum of firms, whose entry to the pool is restricted by a price set by the search engine. We show that a monopolistic search engine may have an incentive to set a relatively low price that encouarges low-relevance advertisers to enter the search pool. This conclusion is independent of whether the search engine charges a price per click or a fixed access fee

Keyword Competition and Determinants of Ad Position in Sponsored Search Advertising

Given the significant growth of the Internet in recent years, marketers have been striving for new techniques and strategies to prosper in the online world. Statistically, search engines have been the most dominant channels of Internet marketing in recent years. However, the mechanics of advertising in such a market place has created a challenging environment for marketers to position their ads among their competitors. This study uses a unique cross-sectional dataset of the top 500 Internet retailers in North America and hierarchical multiple regression analysis to empirically investigate the effect of keyword competition on the relationship between ad position and its determinants in the sponsored search market. To this end, the study utilizes the literature in consumer search behavior, keyword auction mechanism design, and search advertising performance as the theoretical foundation. This study is the first of its kind to examine the sponsored search market characteristics in a cross-sectional setting where the level of keyword competition is explicitly captured in terms of the number of Internet retailers competing for similar keywords. Internet retailing provides an appropriate setting for this study given the high-stake battle for market share and intense competition for keywords in the sponsored search market place. The findings of this study indicate that bid values and ad relevancy metrics as well as their interaction affect the position of ads on the search engine result pages (SERPs). These results confirm some of the findings from previous studies that examined sponsored search advertising performance at a keyword level. Furthermore, the study finds that the position of ads for web-only retailers is dependent on bid values and ad relevancy metrics, whereas, multi-channel retailers are more reliant on their bid values. This difference between web-only and multi-channel retailers is also observed in the moderating effect of keyword competition on the relationships between ad position and its key determinants. Specifically, this study finds that keyword competition has significant moderating effects only for multi-channel retailers

User Satisfaction in Competitive Sponsored Search

We present a model of competition between web search algorithms, and study the impact of such competition on user welfare. In our model, search providers compete for customers by strategically selecting which search results to display in response to user queries. Customers, in turn, have private preferences over search results and will tend to use search engines that are more likely to display pages satisfying their demands. Our main question is whether competition between search engines increases the overall welfare of the users (i.e., the likelihood that a user finds a page of interest). When search engines derive utility only from customers to whom they show relevant results, we show that they differentiate their results, and every equilibrium of the resulting game achieves at least half of the welfare that could be obtained by a social planner. This bound also applies whenever the likelihood of selecting a given engine is a convex function of the probability that a user's demand will be satisfied, which includes natural Markovian models of user behavior. On the other hand, when search engines derive utility from all customers (independent of search result relevance) and the customer demand functions are not convex, there are instances in which the (unique) equilibrium involves no differentiation between engines and a high degree of randomness in search results. This can degrade social welfare by a factor of the square root of N relative to the social optimum, where N is the number of webpages. These bad equilibria persist even when search engines can extract only small (but non-zero) expected revenue from dissatisfied users, and much higher revenue from satisfied ones