Wednesday, November 29, 2017
The Economics of Attention Markets
David Evans, Global Economics Group has a new paper in The Economics of Attention Markets.
ABSTRACT: This paper describes the fundamental economic features of the attention market in which platforms acquire time from consumers and sell access to that time to advertisers who want to deliver messages to those consumers. It introduces an economic framework for analyzing the allocation of time and shows that the attention market is an enormous part of the economy based on the value of time contributed to it. In 2016, based on conservative estimates, American adults spent 437 billion hours, worth at least $7.1 trillion in terms of foregone wages, consuming content on ad-supported media. The paper shows that the exchange of content for time internalizes externalities between consumers and advertisers and that the use of content to harvest attention results in significant economic efficiencies. It then presents a simple model of the attention market, based on platforms competing for scarce attention and selling into a competitive market for advertising, and shows that this model is broadly consistent with key empirical regularities. Lastly, the paper shows that the attention market likely generates considerable consumer surplus from content creation as well as economic efficiency from intensifying competition through the delivery of advertising messages, many of which consumers would have avoided if they could.