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Value Creation by Ad-Funded Platforms

Author

Listed:
  • Gregor Langus
  • Vilen Lipatov

Abstract

We identify features of interactions on online platforms that make an ad-funded business model attractive for the platform, but also for consumers. We then show that ad-funded platforms heavily rely on data for their ability to create value for their users. Formally, we show that data restrictions may trigger a switch away from ad-funded to fee-funded model, resulting in a loss of consumer welfare. We also argue that restricting the effort to increase data quality weakens competition to the detriment of consumers.

Suggested Citation

  • Gregor Langus & Vilen Lipatov, 2022. "Value Creation by Ad-Funded Platforms," CESifo Working Paper Series 9525, CESifo.
    • Handle: RePEc:ces:ceswps:_9525
    as

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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp9525.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ad-funded business model; data aggregation restrictions; targeted advertising; platform competition; merchant competition; transaction costs;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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