Wednesday, September 11, 2013
Posted by D. Daniel Sokol
Florence Thepot, University College London discusses Market Power in Online Search and Social-Networking: A Matter of Two-Sided Markets.
ABSTRACT: The online- search and social-networking industries are characterized by the concentration of large market shares among a very limited number of actors. Being advertisement-based media, search engines and social-networking websites fall within the category of special types of markets known as two-sided markets or platforms. Two-sided markets or platforms have two distinct user groups which produce network benefits for each other. The platforms enable the user groups to minimize the transaction costs they would otherwise incur, in interacting with or searching for each other. Competition authorities cannot ignore the economics of two-sided markets in assessing market power in the search and social networking industries. This paper provides a framework for defining the relevant market and for assessing market power in the industries of online search and social-networking websites, focusing on the current leaders Google and Facebook and argues that online-search and social-networking websites may exert competitive constraints on each other, as they both operate in the relevant market for ‘monetization of user’s information by online advertising’.