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Is the Google platform a two-sided market?

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  • Luchetta, Giacomo

Abstract

Probably not. Or, at least, it is a sui generis two-sided market. Unlike other platforms, such as Microsoft Windows operating system, credit cards, or night clubs, where a single transaction is performed via the platform, two different transactions take place on Google. Users look for search results, while advertisers look for users' eyeballs. Whilst operating systems, credit cards, and night clubs would be meaningless if either of the two sides were missing, search engines (like TV or newspapers) can exist under different market configurations. Indeed, in search engines network externalities run only from the number of users to advertisers, and not the other way around. This thesis is supported by the analysis of the existing literature on two-sided markets and the applications carried out so far to the economics of search engines. According to this analysis, a new construction of the relevant market where Google operates is proposed. Google operates as a retailer of eyeballs, or users' attention. In the upstream market, on one side, it buys well-profiled eyeballs from large retailers, i.e. major websites, at a positive price (Traffic Acquisition Costs); on the other side, it buys eyeballs from single consumers in exchange of search services (in-kind payment). Then, it sells well-profiled eyeballs to advertisers in the downstream market. Based on this market construction, the allegations against Google are analysed as alleged violations of competition law along this vertical chain.

Suggested Citation

  • Luchetta, Giacomo, 2012. "Is the Google platform a two-sided market?," 23rd European Regional ITS Conference, Vienna 2012 60367, International Telecommunications Society (ITS).
  • Handle: RePEc:zbw:itse12:60367
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    Cited by:

    1. Etro, Federico, 2013. "Advertising and search engines. A model of leadership in search advertising," Research in Economics, Elsevier, vol. 67(1), pages 25-38.

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