What is Different About Online Advertising?

Drawing on the literature on online advertising, I argue that the fundamental economic difference between online and offline advertising is a substantial reduction in the cost of targeting. This cost reduction informs what I view as the main themes in the online advertising literature: understanding advertising effectiveness, auctions, privacy, and antitrust.     

Was there too little entry during the Dot Com Era?

We present four stylized facts about the Dot Com Era: (1) there was a widespread belief in a Get Big Fast business strategy, (2) the increase and decrease in public and private equity investment was most prominent in the Internet and information technology sectors, (3) the survival rate of dot com firms is on par with or higher than other emerging industries, and (4) firm survival is independent of private equity funding. To connect these findings we offer a herding model that accommodates a divergence between the information and incentives of venture capitalists and their investors. A Get Big Fast belief cascade could have led to overly focused investment in too few Internet startups and, as a result, too little entry.     

Are employers pursuing value-based purchasing?

Some employers have begun to undertake a variety of initiatives, collectively termed value-based purchasing (VBP), which aim at factoring quality into the purchasing decision-making process when negotiating costs with providers and insurers. There is evidence that the VBP movement has begun gaining momentum; yet it is unclear whether employers are firmly committed to VBP principles. By surveying a national sample of employers, this study investigates the extent to which employers are currently engaged in VBP activities and also increases our understanding of barriers hampering the broader implementation of these activities.     

Privacy Regulation and Market Structure

This paper models how regulatory attempts to protect the privacy of consumers' data affect the competitive structure of data‐intensive industries. Our results suggest that the commonly used consent‐based approach may disproportionately benefit firms that offer a larger scope of services. Therefore, though privacy regulation imposes costs on all firms, it is small firms and new firms that are most adversely affected. We then show that this negative effect will be particularly severe for goods where the price mechanism does not mediate the effect, such as the advertising‐supported Internet.