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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/29860
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| Title: | Media, Aggregators and the Link Economy: Strategic Hyperlink Formation
in Content Networks |
| Authors: | Dellarocas, Chrysanthos - Boston University
Katona, Zsolt - University of California at Berkeley
Rand, William - University of Maryland |
| Issue Date: | 2010 |
| Series/Report no.: | Net Institute Working Paper;10-13 |
| Abstract: | A key property of the World Wide Web is the possibility for firms to
place virtually costless links to third-party content as a substitute or
complement to their own content. This ability to hyperlink has enabled
new types of players, such as search engines and content aggregators, to
successfully enter content ecosystems, attracting traffic and revenues
by hosting links to the content of others. This, in turn, has sparked a
heated controversy between content producers and aggregators regarding
the legitimacy and social costs/benefits of uninhibited free linking.
This work is the first to model the implications of interrelated and
strategic hyper-linking and content investments. Our results provide a
nuanced view of the much-touted 'link economy', highlighting both the
beneficial consequences and the drawbacks of free hyperlinks for content
producers and consumers. We show that content sites can reduce
competition and improve profits by forming links to each other; in such
networks one site makes high investments in content and other sites link
to it. Interestingly, competitive dynamics often preclude the formation
of link networks, even in settings where they would improve everyone's
profits. Furthermore, such networks improve economic efficiency only
when all members have similar abilities to produce content; otherwise
the less capable nodes can free-ride on the content of the more capable
nodes, reducing profits for the capable nodes as well as the average
content quality available to consumers. Within these networks,
aggregators have both positive and negative effects. By making it easier
for consumers to access good quality content they increase the appeal of
the entire content ecosystem relative to the alternatives. To the extent
that this increases the total traffic flowing into the content
ecosystem, aggregators can help increase the profits of the highest
quality content sites. At the same time, however, the market entry of
aggregators takes away some of the revenue that would otherwise go to
content sites. Finally, by placing links to only a subset of available
content, aggregators further increase competitive pressure on content
sites. Interestingly, this can increase the likelihood that such sites
will then attempt to alleviate the competitive pressure by forming link networks. |
| URI: | http://hdl.handle.net/2451/29860 |
| Appears in Collections: | NET Institute Working Papers Series
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