TWO-SIDED MATCHING
First, what does Google do? The answer, I claim, is that Google is a ‘matchmaker’. On the search side, it matches people who are seeking information to people who provide information.
On the ad side, it matches people who want to buy things to those who want to sell things. Ads are themselves a form of search, namely sellers searching for buyers.From an economics perspective, Google runs a ‘two-sided matching’ mechanism. This subject has a long history in economics, starting with the classical linear assignment problem, which seeks to find a matching of partners that maximizes some value function. Not surprisingly, the mathematical theory of the assignment problem turns out to be closely related to the Google ad auction.
The need for efficient matching of users and content is apparent: the growth of content on the Internet has been phenomenal. According to Netcraft.com there were about 650 million web servers as of 2012. Obviously, the more content that is on the web, the more important it is to have good search engines. The web without search engines would be like Borges’s universal library with no card catalog.
In this chapter I will briefly discuss the history of information retrieval, emphasizing some of the points of interest to economics. I will then describe the evolution of the business model to support online search engines, and conclude by sketching some of economic aspects of the Google ad auction.
18.3