Two-Sided Markets with Negative Externalities

This paper analyses a two-sided market in which two platforms compete against each other. One side, the advertisers, exerts a negative externality on the ther side, the users. It is shown that if platforms can charge advertisers only, a higher degree of competition for users can lead to higher profits because competition on the advertisers' side is reduced. If platforms can charge users as well, profits might increase or decrease, the latter because of increased competition through the additional instrument of the user fee. Nevertheless the equilibrium with user fee is more efficient

What Makes them Click: Empirical Analysis of Consumer Demand for Search Advertising

We study users' response to sponsored-search advertising using data from Microsoft's Live AdCenter distributed in the "Beyond Search" initiative. We estimate a structural model of utility maximizing users, which quantifies "user experience" based on their "revealed preferences," and predicts user responses to counterfactual ad placements. In the model, each user chooses clicks sequentially to maximize his expected utility under incomplete information about the relevance of ads. We estimate the substitutability of ads in users' utility function, the fixed effects of different ads and positions, user uncertainty about ads' relevance, and user heterogeneity. We find substantial substitutability of ads, which generates large negative externalities: 40% more clicks would occur in a hypothetical world in which each ad faces no competition. As for counterfactual ad placements, our simulations indicate that CTR-optimal matching increases CTR by 10.1% while user-optimal matching increases user welfare by 13.3%. Moreover, targeting ad placement to specific users could raise user welfare by 59%. Here, we find a significant suboptimality (up to 16% of total welfare) in case the search engine tries to implement a sophisticated matching policy using a misspecified model that does not account for externalities. Finally, user welfare could be raised by 14% if they had full information about the relevance of ads to them.

Analyzing and Modeling Special Offer Campaigns in Location-based Social Networks

The proliferation of mobile handheld devices in combination with the technological advancements in mobile computing has led to a number of innovative services that make use of the location information available on such devices. Traditional yellow pages websites have now moved to mobile platforms, giving the opportunity to local businesses and potential, near-by, customers to connect. These platforms can offer an affordable advertisement channel to local businesses. One of the mechanisms offered by location-based social networks (LBSNs) allows businesses to provide special offers to their customers that connect through the platform. We collect a large time-series dataset from approximately 14 million venues on Foursquare and analyze the performance of such campaigns using randomization techniques and (non-parametric) hypothesis testing with statistical bootstrapping. Our main finding indicates that this type of promotions are not as effective as anecdote success stories might suggest. Finally, we design classifiers by extracting three different types of features that are able to provide an educated decision on whether a special offer campaign for a local business will succeed or not both in short and long term.Comment: in The 9th International AAAI Conference on Web and Social Media (ICWSM 2015

Defining Markets That Involve Multi-Sided Platform Businesses: An Empirical Framework With an Application to Google's Purchase of DoubleClick

A multi-sided platform (MSP) serves as an intermediary for two or more groups of customers who are linked by indirect network effects. Recent research has found that MSPs are significant in many industries and that some standard economic results, such as the Lerner Index, do not apply to them, in material ways, without some significant modification to take linkages between the multiple sides into account. This article extends several key tools used for the analysis of mergers to situations in which one or more of the suppliers are MSPs. It shows that the application of traditional tools to mergers involving MSPs results in biases the direction of which depends on the particular tool being used and other conditions. It also extends these tools to the analysis of the merger of MSPs. The techniques are illustrated with an application to an acquisition by Google in the online advertising industry.

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

Audiovisual economics: Audiovisual markets in the European Union

Focusing on economic aspects of audiovisual industries, this article analyses some of the key EU policy initiatives affecting the sector –the AVMS Directive; the MEDIA Programme; competition and state aid for PSB; and also media ownership and pluralism– in the context of changing technologies and changing markets in Europe. It is notable that the policy ambitions surrounding audiovisual media are varied and do not always pull in the same direction. This article examines the threats and opportunities caused by digitisation and new value chain configurations but argues that conflicting agendas remain a substantive challenge for policy-making at EU lev

Analyzing gender inequality through large-scale Facebook advertising data

Online social media are information resources that can have a transformative power in society. While the Web was envisioned as an equalizing force that allows everyone to access information, the digital divide prevents large amounts of people from being present online. Online social media in particular are prone to gender inequality, an important issue given the link between social media use and employment. Understanding gender inequality in social media is a challenging task due to the necessity of data sources that can provide large-scale measurements across multiple countries. Here we show how the Facebook Gender Divide (FGD), a metric based on aggregated statistics of more than 1.4 Billion users in 217 countries, explains various aspects of worldwide gender inequality. Our analysis shows that the FGD encodes gender equality indices in education, health, and economic opportunity. We find gender differences in network externalities that suggest that using social media has an added value for women. Furthermore, we find that low values of the FGD are associated with increases in economic gender equality. Our results suggest that online social networks, while suffering evident gender imbalance, may lower the barriers that women have to access informational resources and help to narrow the economic gender gap