Online advertising economics

Abstract

While the Internet was used to deliver advertising messages earlier, it was only after it was turned over to largely commercial funding in 1995 that Internet advertising began a still continuing period of rapid revenue growth. Research focused on online advertising has grown apace and, while this interest did not develop entirely overnight, recent years have seen an unprecedented flurry of research on the economics of online advertising. Like Internet advertising itself, the volume of research on economic aspects of Internet advertising has grown dramatically in recent years. The chapter provides a brief overview of the historical development of online advertising and highlights the diversity of the types of advertising services that are counted as part of the online advertising sector. This discussion is followed by an overview of the economics research on ad targeting and search advertising, the two topics that comprise most of the economics literature on Internet advertising. The chapter concludes with an assessment of the current state of research on Internet advertising and thoughts on future research that would help further advance our understanding of this subject.