Discussion Paper Details

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Title: From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising

Author(s): Francesco Decarolis and Gabriele Rovigatti

Publication Date: July 2019

Keyword(s): Buyer Power, Concentration, online advertising, platforms and Sponsored Search

Programme Area(s): Industrial Organization

Abstract: This paper analyzes the impact of intermediaries' concentration on the allocation of revenues in online platforms. We study sponsored search - the sale of ad space on search engines through online auctions - documenting how advertisers increasingly bid through a handful of specialized intermediaries. This enhances automated bidding and data pooling, but lessens competition whenever the intermediary represents competing advertisers. Using data on nearly 40 million Google's keyword-auctions, we first apply machine learning algorithms to cluster keywords into thematic groups serving as relevant markets. Then, through an instrumental variable strategy, we quantify a negative and sizeable impact of intermediaries' concentration on platform's revenues.

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Bibliographic Reference

Decarolis, F and Rovigatti, G. 2019. 'From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising'. London, Centre for Economic Policy Research.