2 ms·

But aren't the ad prices derived by live auction? It's not as if Facebook is pricing above market equilibrium to extract monopoly rents.

ethbr0 5y ago
That Facebook, or Google, sells ad pricing via a live auction doesn't opine on whether that results in overcharging. The mere fact that participation is effectively mandatory itself skews the market.
- missedthecue 5y ago
  Most things we buy are effectively mandatory though. Food, shelter, water, clothing, medicine, and so on and so forth. That can't be the criteria for breaking up a company, which in Facebooks case basically means making them spin Whatsapp and Instagram. (But the management and most of the owners stay the same, mind you)
  - ethbr0 5y ago
    Mandatory to buy, but available from a choice of competitors with adversarial interests to each other. IMHO, an adversarial bidding process (under control of one party) is no replacement for a strategic adversary (capable of planning and executing strategy). The former may prevent the most egregious price raises, but it's insufficient for creating the broader competition that ultimately drives prices down.
webmaven 5y ago
> But aren't the ad prices derived by live auction? It's not as if Facebook is pricing above market equilibrium to extract monopoly rents. There is a peculiar dynamic as the market centralizes toward fewer marketplaces (for example two-sided ones like AdWords) such that buyers have to go there to find sellers and vice-versa, that results in sellers getting stuck in a race to the bottom, while buyers are stuck in a race to the top. It's like the dark mirror of the network effect. The market maker gets to siphon off the growing gap as fees of various sorts. Voila, monopoly rents. FB isn't a two sided marketplace, but buyers are definitely stuck bidding against each other which causes the market equilibrium to rise. And even if you broaden the definition of the market fairly generously such that FB doesn't have a monopoly per-se, you've still got an oligopoly at best.

ethbr0 5y ago

That Facebook, or Google, sells ad pricing via a live auction doesn't opine on whether that results in overcharging. The mere fact that participation is effectively mandatory itself skews the market.

missedthecue 5y ago
Most things we buy are effectively mandatory though. Food, shelter, water, clothing, medicine, and so on and so forth. That can't be the criteria for breaking up a company, which in Facebooks case basically means making them spin Whatsapp and Instagram. (But the management and most of the owners stay the same, mind you)
- ethbr0 5y ago
  Mandatory to buy, but available from a choice of competitors with adversarial interests to each other. IMHO, an adversarial bidding process (under control of one party) is no replacement for a strategic adversary (capable of planning and executing strategy). The former may prevent the most egregious price raises, but it's insufficient for creating the broader competition that ultimately drives prices down.

webmaven 5y ago

> But aren't the ad prices derived by live auction? It's not as if Facebook is pricing above market equilibrium to extract monopoly rents. There is a peculiar dynamic as the market centralizes toward fewer marketplaces (for example two-sided ones like AdWords) such that buyers have to go there to find sellers and vice-versa, that results in sellers getting stuck in a race to the bottom, while buyers are stuck in a race to the top. It's like the dark mirror of the network effect. The market maker gets to siphon off the growing gap as fees of various sorts. Voila, monopoly rents. FB isn't a two sided marketplace, but buyers are definitely stuck bidding against each other which causes the market equilibrium to rise. And even if you broaden the definition of the market fairly generously such that FB doesn't have a monopoly per-se, you've still got an oligopoly at best.