Online Auctions and Digital Marketing Agencies

Abstract

We present an empirical investigation of the role of marketing agencies in Google's online ad auctions. By combining data on advertisers' affiliation to marketing agencies with data on bidding in ad auctions, we analyze how changes in the concentration of clients in the same industry under the same ad network are associated with changes in keyword bidding in terms of entry, exit, and pricing strategies. Moreover, by exploiting the case of a recent merger between agencies, we estimate through a difference-indifferences strategy that an increase in concentration leads to reduction in the average cost-per-click of the keywords affected by the merger.

The Logic and Management of 'Digital Co-op' in Search Advertising

“…Furthermore, we show that the reason to sponsor a retailer's ad spend is quite different for branded keywords. For similar reasons, our paper also differs from some recent empirical works that investigate collusive bidding behaviors Rovigatti 2017), where competing bidders delegate their bidding decisions to a common marketing agency. Choi (1991) considers two manufacturers selling products via a common retailer using linear wholesale contracts.…”