Topic 4 - Search Engines Flashcards
Describe search engines as multi sided platforms
Users -free-> search engine <- advertisers
What are the factors that explain the concentration in the search engine market
Economies of scale - high fixed cost for infrastructure (economies of sale in the design of algorithms), indirect network effects - larger the number of users = more attractive for advertisers, switching costs
Describe switching costs on SEs
Users - easy, personalisation?
Advertisers - incentive to advertise on a small platform
Pagerank and how it works
How many important sires link to a given site
Works by counting the number and quality of links to a page to determine a rough estimate of how important the website is
— more important sites will be likely to receive more links from other sites
GoTo.com business model
Advertisers bid for first placement on the site
Paid per click
Basic overview of google ad auctions
Everytime someone types a query, auction is run which determines which advertisers get up to 11 sponsored links on every results page - google gets 98% of the profits
Grows with internet usage
Each keyword - advertiser submits bid - if high enough.- add will be shown
Google ad auction steps
Allocate positions among advertisers
Price the positions
Explain googles position allocation scheme
Allocation scheme determines position of ad on results page
Calculates ad rank - bid x ad quality score
Bid is submitted by advertisers fir keywords relevant to users search
Ad quality score - measure of relevance of ad
Google has interest in ad quality score
Advertisers prefer highest ad rank - higher prob of clicks (maximise the clicks)
Describe googles pricing scheme (ad auctions)
Google calculates cost per click in each position
In position 1, solve: p1 * ad quality = b2 * ad quality
Price to maintain ad position: p1 = b2* ad quality2/ ad quality 1
Summarize the pricing of ad positions
Advertiser submits list of keywords
User entered a query, google compiles list of words that will match the query
List of ads is ordered based on bid and ad quality - measure of relevance to the user
Highest ranked add is ranked and showed first and so follows
If user clicks - advertiser is charged a price that depends on the bid and the quality of the ad of the advertiser below him
Discuss whether SEs should show more ads
Benefits - more revenue
Costs - less competition between advertisers (lower ad price), relevance goes down (less users click)
Optimal choice is a trade off between short run profits and long term run goals
What is SE bias
Listing of search results in the SEs best interest
Platform manipulates search results strategically to promote its own interests
Can a search engine influence consumer behaviour by biasing search results?
what incentives are there for SEs to bias search results
Discuss impact of ranking on clicks
Links at top get more clicks
Correlation or causation
-50% and up up -85% traffic between first and 10th rank
incentives to bias search results
Diverting customers toward more profitable results
Increasing the value of paid links (thus bids)
Favouring its own services of vertical integration
Bias toward sponsored links - they used to be placed on the side out of the golden triangle (usual eye tracking - in later years study)
Bias towards sponsored links (Taylor 2013)
Displays organic results and sponsored content
Derives revenue from paid links
Organic - no revenue
— SEs can induce clicks on more paid links by making organic links less relevant
Incentives to decrease quality of organic links
— positive - reduces cannibalization of paid links by organic links
— negative - lowers quality of search engine thus search activity
Trade off between activity and revenues
Example of revenue-activity trade offs by amazon, booking.com, Spotify
Amazon - diverting to products with higher margins
Booking - diverting to hotels that don’t offer lower prices outside of booking.com
Spotify - diverting to songs with lower margins
Describe the idea and trade offs of relaxing competition between advertisers
Search engine obtains profits from advertisers - interest that valuation for clicks is high
Advertisers have higher valuation of clicks if competition is soft (fewer relevant links)
More product market competition - lower prices because lower chance of clicks
Search engines have incentive to manipulate search engine results to relax product market competition
Describe bias due to vertical integration
Search engine links to publisher based on - consumer taste and amount of advertising
If one is a stronger competitor - biased against this publisher
Integration can increase or decrease bias
- increase revenue from own publisher
Less bias -`> higher quality results -> larger marginal revenues from increasing total demand
Main complaints of the European Commission against google
Search bias - favouring own services
Violation of IP rights
Contraction restrictions for web operators (exclusivity and non transferability of advertisement campaigns)
Contractual restrictions for Android manufacturers
What makes the case of the Euro commission against google so tricky?
Market dominance - what is the dominant market when searching
General search - google is dominant
Does the relevant market include vertical search engines e.g., amazon - google is not dominant in places like this
Abuse of a dominan
Why is search discrimination an abuse of a dominant position
Positional remedies to googles abuse of their dominant position
Mandate search neutrality
Unbundle googles search business
Open algorithm
Regulate algorithm
Share historical data
