Dae-keun Cho, Journal of Internet Computing and Services, Vol. 18, No. 4, pp. 109-120, Aug. 2017
10.7472/jksii.2017.18.4.109, Full Text:
Keywords: Two-sided market, Search advertising, market definition, Indirect Network Externality, Naver

Abstract

This paper is to analyse empirically using the data collected from Korea portal Naver's ad management system and show online ad platform may not be two-sided market. It is aim of this study to propose the appropriate approach to define the market, based on the empirical result. Here are two research questions to be reviewed. First, is there any consistency between business model of search advertising and definition of two-sided market which Rochet-Tirole proposed in 2006? Second, do indirect network externalities exist significantly in search advertising market? if so, this study is going to estimate the level of it through empirical measurement. Based on Luchetta's paper which suggested that google may be one-sided market, it performed the correlation & regression analysis to prove his suggestion. The result is that online search advertising costs increased by more than 50 won when advertisers increased by one unit. However, there was no significant correlation and regression between the search frequency and online search advertising cost. It means that there is little possibility to identify two-sidedness in online search advertising service(market) because of no(or little) indirect network externalities which are a necessary condition for two-sided market. This result has three implications, such as the availability to adapt traditional market definition tools to online search advertising market, the possibility enhancement to find the fundamental competition elements in defined market and promotion of the powers of persuasion in competitive market reality. It is significant that the gap between legal scholars including regulatory practitioners and economists can be overcome to some extent. who have shown the different perspective on the two-sided market.

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