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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 intermediary concentration on the allocation of revenues in online platforms. We study sponsored search 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 keyword auctions, we first apply machine learning algorithms to cluster keywords into thematic groups serving as relevant markets. Using an instrumental variable strategy, we estimate a decline in the platform's revenues of approximately 11 percent due to the average rise in concentration associated with intermediary M&A activity.

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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. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13897