On the Optimality of Clickthrough Fees in Online Markets

We study optimal fee setting decisions by a monopoly online platform connecting ad-vertisers with potential buyers in two environments: (1) a simple model that captures stylized features of advertising on search engines, social networks, and ad-supported email, and (2) a richer model that is more relevant for directedsearch at price com-parison sites. While the platform can choose to charge both for impressions as well as clicks, we show that the platform maximizes pro\u85ts by using clickthrough fees ex-clusively. Our model o¤ers a rationale for the evolving practice of relying purely on clickthrough fees for revenues in many online advertising markets