DP13897 From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising
|Author(s):||Francesco Decarolis, Gabriele Rovigatti|
|Publication Date:||July 2019|
|Keyword(s):||Buyer Power, Concentration, online advertising, platforms, Sponsored Search|
|JEL(s):||C72, D44, L81|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=13897|
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.