American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising
American Economic Review
vol. 111,
no. 10, October 2021
(pp. 3299–3327)
(Complimentary)
Abstract
This paper analyzes the impact of intermediary concentration on the allocation of revenue 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 revenue of approximately 11 percent due to the average rise in concentration associated with intermediary merger and acquisition activity.Citation
Decarolis, Francesco, and Gabriele Rovigatti. 2021. "From Mad Men to Maths Men: Concentration and Buyer Power in Online Advertising." American Economic Review, 111 (10): 3299–3327. DOI: 10.1257/aer.20190811Additional Materials
JEL Classification
- C45 Neural Networks and Related Topics
- D44 Auctions
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L13 Oligopoly and Other Imperfect Markets
- L81 Retail and Wholesale Trade; e-Commerce
- M37 Advertising