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Advertising, Content, and Welfare

 |  October 20, 2019

Posted by Social Science Research Network

Advertising, Content, and Welfare

By David S. Evans (Global Economics Group)

The attention market involves competition in which platforms acquire time from consumers, with bundles of content and ads, and sell ads to marketers to deliver messages during that time. This paper shows that the attention market solves a transaction-cost problem that prevents efficient exchange between consumers and advertisers and that content plays a central role in solving that problem. The attention market contributes to consumer welfare by supplying valuable content, which more than compensates for any nuisance value of ads, and by facilitating competition through the provision of ads. This paper shows that American adults will spend more than 500 billion hours on ad-supported content in 2019. The value of content is measured in the trillions of dollars given the opportunity cost of time; recent studies of the consumer valuation of online media are consistent with that order of magnitude.

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