This presentation by David Evans, Chairman, Global Economics Group, was prepared for the discussion “Competition in digital advertising markets” at the 70th meeting of the OECD Working Party No. 2 on Competition and Regulation on 30 November 2020. More papers and presentations on the topic can be found at http://oe.cd/cdam. This presentation was uploaded with the author’s consent.

1. Content Is King, Time Is Currency
Basic Economics of Attention Platforms and
Implications for Public Policy
David S. Evans
Global Economics Group
University College London
30 November 2020
Email: david.evans@marketplatforms.com

2. Basic Economics of Attention
Platforms

3. Attention platforms big part of
economy—in US people spend
more time on them than they
spend working. And that’s how
advertisers mainly reach people.
Two of largest publicly traded
companies in world—Facebook
and Google—mainly make
money this way and a third—
Amazon is doing much more.
Subject of intense scrutiny over
privacy, data, anticompetitive
practices.
And you can and will multitask, so
it isn’t really much of your time.
Why Should Your Precious Spend Time On This?

4. Attention Platforms Trade Content for Time with Viewers
 Attention platforms use content to persuade people
to spend time and get their attention for ads in
return.
 Content is often free (almost all online platforms);
when there’s a price it seldom covers costs (print
magazines).
 Attention platforms therefore engage in barter with
viewers-–exchanges that largely take place outside of
the price system.
 Attention platforms sell marketers access to viewers
to present ads during the time they spend on the
platform.
MASSIVE BARTER ECONOMY,
CONTENT VALUE NOT ACCOUNTED FOR IN GDP.

5. Content Is King in Attention Markets
 It is the payment for time that could provide
attention to ads.
 It is the place for inserting ads that could
attract attention.
 It is the matchmaker for attracting the right
eyeballs to the right marketers.
 It is efficient because fixed cost of content
attracts many viewers.
CONTENT IS KING. CONTENT RULES! Google search today. Basic model
originated with late 17th century
newspapers.

6. Time Is Currency in Attention Markets
 Consumers “pay” for content by providing their time,
sometimes their attention, often their personal data online.
 Platforms exchange time from consumers for money from
marketers.
 Companies like Nielsen monitor the flow of this currency.
 Marketers can’t get attention unless viewers spend time.
.

7. Americans Spend Massive Amounts of Time on Attention Platforms
 A typical American adult spends around 8.8
hours a day watching, reading, or listening to
content that has ads in it based on 2019Q1
data (not including print.) (805B hours; 360B
online).
 About 5.6 hours a day where they are mainly
engaged in content rather than just have
content playing in the background. (514B
hours; 230B online).
 More hours spent on attention platforms than
work (325B hours worked in 2018).
Average Hours Spent Per U.S.
Adult Per Day 2019Q1
Source: Evans (2020) The Economics of Attention Markets
HARD TO VALUE CONTENT THAT PEOPLE CONSUME WITH THIS TIME
BECAUSE MOST CONTENT IS FREE OR AT SUBSIDIZED PRICES.

8. Spending Time Has An Opportunity Cost
 People have a finite amount of time; you can only
spend time once.
 So time has an opportunity cost. A minute more
on one activity means a minute less on another.
 Watch TV, read to kids, play sports, take a course,
work some more. These are all choices we make.
 Even multitasking has an opportunity cost—many
different things you could also do while watching
TV or listening to a lecture.
 Time is money—you can always work more to
make more money to buy more stuff (Becker,
1965).

9. Free Content Received from Attention
Platforms Valuable
 Measuring size and consumer surplus from largely
free content is hard but rough estimates indicate
value likely massive relative to GDP.
 Opportunity cost of time = $7.0 trillion dollars for US
in 2019 which provides rough estimate of of attention
industry (rectangle). (Evans 2020).
 Recent social surplus estimates find $3.8 trillion for
online (Brynjolfsson, Collis, Eggers 2019) and $410
billion for Facebook (Allcot, Braghieri, and Gentzkow
2019) from sophisticated surveys, both for US.
Time is Money!
Consumer “Spending” and
Consumer Surplus for Attention
Platforms

10. Attention Brokers Are Two-Sided Platforms
 Connect two distinct types of users (people and marketers).
 To facilitate exchange, solve externality problem, reduce
transactions costs.
 Positive Indirect network effects—advertisers value more
users.
 Use “pricing structure” to deal with externality with common
structure being $0 to viewer, $+ to marketer.
Modern economic literature, since mid 2000s, on ad-supported media relies
on the two-sided platform framework developed by Rochet and Tirole (2003) to
model ad-supported media businesses. Rich theoretical and empirical literature.

11. Attention Platforms Use Content to Capture User Time and Sell Ads
Mixed with Content
Advertisers value platforms with more users.
Users may not like seeing ads, but they do like content.
And ads fund the content.
Users
Spend Time
Ads Capture
Attention,
Fund Content
Content
Attracts
Users
Content
Ads
The more time people
spend consuming content,
the more opportunities
there are to present them
with ads, which might
capture their attention.

12. Competition Policy Framework
for Online Platforms

13. Users and Advertisers Enter into Exchanges with Attention
Platform
User Gives
 Time for Consuming
Content
 Data/Loss of Privacy
 Content/Ad Bundles
 Both Targeted with Data
Platform Gives
Advertiser Gives
 Money for Inserting..
 …Targeted Ads…
 …That User Clicks On
 Ads in Content
 Targeted with Data
Platform Gives
Content
Ads

14. What Might Go Wrong?
Consumer Protection Problems
User Gives
 Time Consuming Content
 Data/Privacy
 Content/Ad Bundles
 Both Targeted with Data
Platform Gives
Content
Ads
 Consumer deception—don’t understand contract, give up too much data, lose too much
privacy.
 Consumer fraud—platform does things with data beyond permissions in contract,
consumer loses privacy, incurs other harms.
 Might also result in social harms from negative externalities or internalities for behavioral
reasons.

15. What Might Go Wrong?
Exploitative Conduct
User Gives
 Time Consuming Content
 Data/Privacy
 Content/Ad Bundles
 Both Targeted with Data
Platform Gives
Content
Ads
Given platform dominance, user forced to pay too much for content in the form of
foregone data, lost privacy, and time. Similar to excessive pricing with all elements
not having monetary prices, including the content.

16. What Might Go Wrong?
Exclusionary Conduct
User Gives
 Time Consuming Content
 Data/Privacy
 Content/Ad Bundles
 Both Targeted with Data
Platform Gives
Content
Ads
Harms competition from rival platforms through use and abuse of data. Of course,
lots of other ways attentions platforms could abuse dominant positions on user
and advertiser side.

17. What Might Go Wrong?
Mergers
User Gives
 Time Consuming Content
 Data/Privacy
 Content/Ad Bundles
 Both Targeted with Data
Platform Gives
Content
Ads
Platforms compete for attention but internalize diversion of viewers post merger;
viewers get less (free content) and advertisers pay higher prices for fewer slots post
merger.

18. What’s the Relevant Market?
Not So Easy
Market definition can be difficult for attention platforms depending on the issue.
Economists have tools to deal with these, but feedback loops and zero prices often takes
analysis outside of standard models.
For advertisers, attention platforms can be substitutes (alternative places to put ads) and
complements (multiple ways to reinforce messages) for advertisers.
Users and advertisers may have different alternatives so different sources of competitive constraints.
Attention is infinitely depreciable advertisers can only get that attention from the platform that has
it—important for product search.
Free content makes effects analysis complicated but need to value content through other means.
Feedback loops between two sides makes economics complicated with sometimes surprising results
and differences in welfare between users and advertisers.

19. Is There Consumer Harm/Abuse?
Could Intervention Improve Users Position?
Attention platform cases difficult because many elements of exchange are not priced.
Many tools available for placing values on non-priced goods.
Users
Spend Time
Ads Capture
Attention,
Fund Content
Content
Attracts
Users
Content
Ads
Assessing whether there are exploitative or
exclusionary abuses/anticompetitive
conduct needs to account for value of
content as well as data/privacy, and account
for feedback effects;
Assessing whether an intervention could
improve consumer welfare, including
consumer-protection related ones, also
requires accounting for value of content as
well as data/privacy, and account for
feedback effects.

20. Some Ad-Free Reading Material
 David Evans (2020) “The Economics of Attention Markets,” Work Paper, available at
https://ssrn.com/abstract=3044858
 David Evans (2019) “Attention Platforms, the Value of Content and Public Policy,” Review of Industrial
Organization; available at https://ssrn.com/abstract=3261815
 Tim Wu (2018) “Blind Spot: The Attention Economy and the Law,” Antitrust Law Journal,
forthcoming, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2941094
 David Evans (2013) “Attention Rivalry Among Online Platforms,” University of Chicago Institute for
Law & Economics Olin Research Paper, available at
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2195340
 Kevin Murphy and Ignacio Palacios-Huerta (2016) “A Theory of Bundling Advertisements in Media
Markets,” NBER Working Paper, available at http://www.nber.org/papers/w22994
 Andre Boik, Shane Greenstein, and Jeffrey Prince (2016) “The Empirical Economics of Online
Attention,” NBER Working Paper, available at http://www.nber.org/papers/w22427

21. Available on Amazon