CHAPTER 10
The Economics of Internet Media
Martin Peitz*, Markus Reisinger
†
*
Department of Economics, University of Mannheim, Mannheim, Germany
†
Department of Economics, Frankfurt School of Finance & Managemen t, Frankfurt, Germany
Contents
10.1. Introduction 446
10.2. Media and Advertising on the Internet: Some Facts 450
10.2.1 Facts About Internet Media Use 450
10.2.2 Facts About Internet Advertising 454
10.3. Providing Media Content 459
10.3.1 Internet Media Consumption and Convergence 459
10.3.2 Media Platforms as Gatekeepers 460
10.3.3 News Aggregators and the Selection of News 462
10.3.4 Search Engines and Media Content 466
10.3.5 ISPs, Net Neutrality, and Media Content 468
10.4. Users Choosing Media Content 470
10.4.1 Consumer Choice with Multi-Homing and Its Implications on Content 472
10.4.2 Search Engines and Search Bias 481
10.4.3 Information Spreading on the Internet 491
10.5. Media Platforms Matching Advertising to Content 494
10.5.1 How to Formalize Targeting 495
10.5.2 Keyword Advertising 505
10.6. Media Platforms Matching Advertising to Users 511
10.6.1 Tracking and Personalized Offers 512
10.6.2 Advertising Congestion and Limited Attention 522
10.7. Conclusion 525
Acknowledgments 526
References 526
Abstract
We survey the economics literature on media as it applies to the Internet. The Internet is an important
driver behind media convergence and connects information and communication technologies. While
new Internet media share some properties with traditional media, several novel features have
appeared: On the content side, aggregation by third parties that have no editorial policy and user-
generated content has become increasingly important. On the advertiser side, fine-tuned tailoring
and targeting of ads based on individual user characteristics are common features on many Internet
media and social networks. On the user side, we observe increased possibilities of time-shifting, multi-
homing, and active search. These changes have gone hand-in-hand with new players entering media
markets, including search engines and Internet service providers. Some of these players face novel
445
Handbook of Media Economics,Volume1A © 2016 Elsevier B.V.
ISSN 2213-6630,
http://dx.doi.org/10.1016/B978-0-444-62721-6.00010-X All rights reserved.
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