Abstract and Keywords
This article describes the recent developments in online advertising and provides a mostly theory-oriented survey on advertising on the Internet. Social networking is marked by a (one-sided) positive network effect. Advertising pricing in traditional media is based on measures of expected impressions. Technology available on the Internet has allowed advertisers to track the performance of ads. Advertising finance is not the only revenue source for websites. The logit model offers a convenient way to think about the effect of the importance of the site and the number of ads it presents. It is noted that low-quality sites have lots of ads and are free. Higher pricing of messages results in more examination, less congestion, and better matches for both sides of the market. Markets provide the goods that consumers want to buy.
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