Seminar – From Mad Men to Maths Men: Concentration & Buyer Power in Online Advertising

Dr Francesco Decarolis, Bocconi University

This paper analyses 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 specialised 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, the research first applies machine learning algorithms to cluster keywords into thematic groups serving as relevant markets. Then, through an instrumental variable strategy, the study quantifies a negative and sizeable impact of intermediaries’ concentration on the platform’s revenues.

Speaker bio

Francesco Decarolis is an Associate Professor of Economics at Bocconi University, where he holds the Agnelli Chair of Economics. His research focuses on Industrial Organisation with an emphasis on issues related to firms’ competition, government procurement, health insurance markets and online advertising. He holds a PhD in Economics from the University of Chicago. Prior to joining Bocconi University, he held appointments at Boston University, the University of Wisconsin Madison, the University of Pennsylvania and the Bank of Italy.