INTRODUCTION
While the Internet was used to deliver advertising messages earlier, it was only after it was turned over to largely commercial funding in 1995 that Internet advertising began a still continuing period of rapid revenue growth.
In the USA it was propelled to second place behind television among paid advertising media after surpassing print (newspapers plus magazines) in 2012 (eMarketer, 2013). While slightly lagging behind developments in the USA, the trend has been similar for other economically advanced nations. Research focused on online advertising has grown apace and, while this interest did not develop entirely overnight, recent years have seen an unprecedented flurry of research on the economics of online advertising. Like Internet advertising itself, the volume of research on economic aspects of Internet advertising has grown dramatically in recent years.For the most part, this research has focused on advancing our still very incomplete understanding of the economic logic underlying services, features and practices that visibly, and, in many cases, quite dramatically, distinguish online ads from their offline counterparts. At the same time, less visible aspects of the organization of online advertising markets and the institutional infrastructure that supports them have yet to be subjected to rigorous economic study. One of our aims for this chapter is to identify topics in need of serious investigation if we are to develop a thorough understanding of the economics of this still evolving segment of the larger advertising industry.
The chapter is organized as follows. The next section provides a brief overview of the historical development of online advertising and highlights the diversity of the types of advertising services that are counted as part of the online advertising sector. The two sections that follow provide, respectively, an overview of the economics research on ad targeting and search advertising, the two topics that comprise most of the economics literature on Internet advertising. A final section presents our assessment of the current state of research on Internet advertising and thoughts on future research that would help further advance our understanding of this subject.
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