CONCLUSION
Growth in Internet advertising has paralleled that of the Internet overall. In a little over two decades Internet advertising has grown from near invisibility to the second largest advertising category by revenue in the USA and its growth has been nearly as impressive in most other advanced economies.
It almost certainly will occupy the top spot for many countries within the next several years. An economic phenomenon of this magnitude merits attention from economists, but what makes Internet advertising an especially interesting topic for economic research is that we are not just witnessing the application of old business models to a new medium.Point-to-point delivery of messages combined with advanced data collection and data analytics capabilities have made it possible for advertisers to connect with consumers in entirely new ways. Researchers have focused on what this means for search advertising and display advertising, the two categories of Internet advertising that overwhelmingly dominate expenditures on Internet ads. Search advertising is unique to the Internet and Internet display ads can take advantage of advanced targeting capabilities that other media simply cannot provide. For both types of Internet advertising, it is clear that our understanding of the fundamental questions that need to be addressed has advanced considerably; but it is also clear that much work remains to be done before we can claim a deep and empirically grounded understanding of these phenomena.
NOTES
1. In 2013, ‘other’ included interstitial, slotting fees, and referrals. The list of minor categories has varied over time as new categories have been introduced and others have disappeared.
2. For example, in the USA, Nielsen dominates in the supply of standardized television ratings and the Audit Bureau of Circulation (ABC) has long been the principal audience measurement service for newspapers and magazines.
3. Contextual targeting, where an advertiser selects a media outlet because the advertiser expects its content will attract an audience with a high percentage of prospective customers, is another common form of targeting. Contextual targeting is employed with both online and offline media services. It is not covered in this review because no compelling case has been made that that this strategy works better or differently in an online environment.
REFERENCES
Aggarwal, G., A. Goel and R. Motwani (2006), ‘Truthful auctions for pricing search keywords’, in Proceedings of the 7th ACM Conference on Electronic Commerce (EC,06), pp. 1-7.
Athey, S. and J.S. Gans (2010), ‘The impact of targeting on advertising markets and media competition’, American Economic Review, 100 (2), 608-13.
Athey, S. and G. Ellison (2011), ‘Position auctions with consumer search’, The Quarterly Journal of Economics, 126 (3), 1213-70.
Athey, S. and D. Nekipelov (2011), ‘A structural model of sponsored search advertising auctions’, unpublished paper, accessed 9 August 2015 at http://eml.berkeley.edu/~nekipelov/pdf_papers/paper16.pdf.
Athey, S., E. Calvano and J.S. Gans (2013), ‘The impact of the Internet on advertising markets for news media’, NBER Working Paper No. 19419, accessed 8 August 2015 at http://ssrn.com/abstract=2325793.
Bergemann, D. and A. Bonatti (2011), ‘Targeting in advertising markets: Implications for offline vs. online media’, RAND Journal of Economics, 42 (3), 417-43.
Bourn, J. (2013), ‘Online advertising: A history from 1993 to the present day’, MarketingTech, 11 September, accessed 8 August 2015 at http://www.marketingtechnews.net/news/2013/sep/11/online-advertising-history- 1993-present-day-infographic/.
Caragiannis, I., C. Kaklamanis and P. Kanellopoulous et al. (2011), ‘On the efficiency of equilibria in second price auctions’, in Proceedings of the 12th ACM Conference on Electronic Commerce (EC,11), pp. 81-90.
Cary, M., A.
Das and B. Edelman et al. (2007), ‘Greedy bidding strategies for keyword auctions’, in Proceedings of the 8th ACM conference on Electronic commerce (EC,07), pp. 262-71.comScore Media Metrix (2012), ‘comScore Media Metrix ranks top 50 US web properties for June 2012’ [press release], accessed 8 August 2015 at http://www.comscore.com/Insights/Press_Releases/2012/7/ comScore_Media_Metrix_Ranks_Top_50_US_Web_Properties_for_June_2012.
Edelman, B. and M. Ostrovsky (2007), ‘Strategic bidder behavior in sponsored search auctions’, Decision Support Systems, 43 (1), 192-8.
Edelman, B., M. Ostrovsky and M. Schwarz (2007), ‘Internet advertising and the generalized second-price auction: Selling billions of dollars worth of keywords’, American Economic Review, 97 (1), 242-59.
eMarketer(2013),‘UStotalmediaadspendinchesup,pushedbydigital’, eMarketer,22August,accessed9August2015 at http://www.emarketer.com/Article/US-Total-Media-Ad-Spend-Inches-Up-Pushed-by-Digital/1010154.
Fu, W., W. Ma, C. Ting and S.S. Wildman (2015), ‘Feedback effects in search advertising’, accessed 9 August 2015 http://ssrn.com/abstract=2588245.
Gal-Or, E. and M. Gal-Or (2005), ‘Customized advertising via a common media distributor’, Marketing Science, 24 (2), 241-53.
Goldfarb, A. (2014), ‘What is different about online advertising?’, Review of Industrial Organization, 44 (2), 115-29.
Goldfarb, A. and C. Tucker (2011), ‘Privacy regulation and online advertising’, Management Science, 57 (1), 57-71.
Gomes, R. and K. Sweeney (2014), ‘Bayes-Nash equilibria of the generalized second-price auction’, Games and Economic Behavior, 86, 421-37.
Interactive Advertising Bureau (1999), ‘First quarter 1999 Internet advertising revenues double over first quarter 1998’ [press release], accessed 28 December 2015 at http://www.iab.com/about_the_iab/recent_press_releases/ press_release_archive/press_release/4337.
Interactive Advertising Bureau (2000), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IAB_PWC_1999Q4.pdf.
Interactive Advertising Bureau (2001), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IAB_PwC_004_2000.pdf.
Interactive Advertising Bureau (2002), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/resources_adrevenue_pdf_IAB_PWC_2001Q4.pdf.
Interactive Advertising Bureau (2003), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/resources_adrevenue_pdf_IAB_PwC_2002final.pdf.
Interactive Advertising Bureau (2004), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/resources_adrevenue_pdf_IAB_PwC_2003.pdf.
Interactive Advertising Bureau (2005), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/resources_adrevenue_pdf_IAB_PwC_2004full.pdf.
Interactive Advertising Bureau (2006), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/resources_adrevenue_pdf_IAB_PwC_2005.pdf.
Interactive Advertising Bureau (2007), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/resources_adrevenue_pdf_IAB_PwC_2006_Final.pdf.
Interactive Advertising Bureau (2008), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IAB_PwC_2007_full_year.pdf.
Interactive Advertising Bureau (2009), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IAB_PwC_2008_full_year.pdf.
Interactive Advertising Bureau (2010), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IAB-Ad-Revenue-Full-Year-2009.pdf.
Interactive Advertising Bureau (2011), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IAB_Full_year_2010_0413_Final.pdf.
Interactive Advertising Bureau (2012), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IAB_Internet_Advertising_Revenue_Report_FY_2011.pdf.
Interactive Advertising Bureau (2013), IAB Internet Advertising Revenue Report, accessed 15 December 2013 at http://www.iab.net/media/file/IABInternetAdvertisingRevenueReportFY2012POSTED.pdf.
Interactive Advertising Bureau (2014), IAB Internet Advertising Revenue Report, http://www.iab.net/media/file/ IAB_Internet_Advertising_Revenue_Report_FY_2013.pdf.
Iyer, G., D. Soberman and J.M. Villas-Boas (2005), ‘The targeting of advertising’, Marketing Science, 24 (3), 461-76.
Kaye, B.K. and N.J. Medoff (2001), Just a Click Away: Advertising on the Internet, Boston, MA: Allyn and Bacon.
Kim, E. and S.S. Wildman (2006), ‘A deeper look at the economics of advertiser support for television: The implications of consumption-differentiated viewers and ad addressability’, Journal of Media Economics, 19 (1), 55-79.
Lahaie, S. and D.M. Pennock (2007), ‘Revenue analysis of a family of ranking rules for keyword auctions’, in Proceedings of the 8th ACM conference on Electronic Commerce (EC,07), pp. 50-56.
Levin, J. and P. Milgrom (2010), ‘Heterogeneity and conflation in market design’, American Economic Review, 100 (2), 603-7.
Liang, L. and Q. Qi (2007), ‘Cooperative or vindictive: Bidding strategies in sponsored search auction’, in X. Deng and F.C. Graham (eds), Internet and Network Economics: Third International Workshop, WINE 2007, San Diego, CA, USA, December 12-14, 2007, Berlin and Heidelberg: Springer, pp. 167-78.
Lucier, B., R. Paes Leme and E. Tardos (2012), ‘On revenue in the generalized second price auction’, in Proceedings of the 21st International Conference on World Wide Web (WWW’12), pp. 361-70.
Morrissey, B. (2013), ‘How the banner ad was born’, Digiday, 12 April, accessed 15 July 2014 at http://digiday. com/agencies/how-the-banner-ad-was-born/.
Paes Leme, R. and E. Tardos (2010), ‘Pure and Bayes-Nash price of anarchy for generalized second price auction’, paper at the 1st Annual IEEE Symposium on Foundations of Computer Science (FOCS), 23-26 October, Las Vegas, NV.
Parikh, A. and S. Deshmukh (2013), ‘Search engine optimization’, International Journal of Engineering Research & Technology, 2 (11), 3146-53.
Reynolds, K. (2011), ‘Are ad exchanges and real time bidding the next big thing?’, Advertising Perspectives, accessed 15 July 2014 at http://www.advertisingperspectives.com/adblog/media-technology/are-ad-exchanges-and-real- time-bidding-the-next-big-thing/.
Seabrook, A. (2008), ‘At 30, spam going nowhere soon’, NPR, 3 May, accessed 12 December at 2013 http:// www.npr.org/templates/story/story.php?storyId=90160617.
Shafer, J. (2011), ‘SEO speedwagon: The rapid rise and sale of Arianna Huffington’s Post’, Slate, 7 February, accessed 11 January 2015 at http://www.slate.com/articles/news_and_politics/press_box/2011/02/seo_speed- wagon.html.
Thompson, D.R.M. and K. Leyton-Brown (2013), ‘Revenue optimization in the generalized second-price auction’, in Proceedings of the Fourteenth ACM Conference on Electronic Commerce (EC,13), pp. 837-52.
Varian, H.R. (2007), ‘Position auctions’, International Journal of Industrial Organization, 25 (6), 1163-78.
Yuan, J. (2011), ‘Estimating the efficiency improvement of the resource allocation in the Yahoo! keyword auction’, International Journal of Humanities and Social Science, 1 (18), 272-84.
Yuan, J. (2012), ‘Examining the Yahoo! sponsored search auctions: A regression discontinuity design approach’, International Journal of Economics and Finance, 4 (3), 139-51.
Zhang, X. and J. Feng (2011), ‘Cyclical bid adjustments in search-engine advertising’, Management Science, 57 (9), 1703-19.
Zhou, Y. and R. Lukose (2007), ‘Vindictive bidding in keyword auctions’, in Proceedings of the Ninth International Conference on Electronic Commerce (ICEC,07), pp. 41-46.
21.