Wednesday, October 30, 2013
Giacomo Luchetta, The Centre for European Policy Studies asks IS THE GOOGLE PLATFORM A TWO-SIDED MARKET?
ABSTRACT: Probably not, is the short answer to that question. Unlike other platforms, such as operating systems, credit cards, or even nightclubs, where a single transaction is performed via the platform, two different transactions take place on Google. Users perform searches in exchange for personal data, while advertisers seek users' attention—to be matched with the “right” user. Whereas operating systems, credit cards, and nightclubs would cease to exist if either of the two sides were missing, search engines (rather like TV or newspapers) can exist under different market configurations. Indeed, in search engines, network externalities run only from the number of users to advertisers, not the other way around. Building upon this analysis, a non-bilateral construction of the relevant market where Google operates is proposed. Google operates as a retailer of users' personal information. In the upstream market, it buys users' personal information from large retailers and final consumers in exchange for search services, or upon monetary payment. It then uses the personal information collected to sell targeted advertising to advertisers in the downstream market. Based on this market construction, the allegations against Google are analyzed as alleged violations of competition law along this vertical chain.