Category: genres

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Priced and Unpriced Online Markets

Edelman, Benjamin. “Priced and Unpriced Online Markets.” Journal of Economic Perspectives 23, no. 3 (Summer 2009): 21-36.

With forces both supporting and opposing zero prices, typical Internet-related activities–like surfing the web, web searches, and e-mail, along with behind-the-scenes practices like domain names and the allocation of IP (Internet Protocol) addresses–present a natural context to reevaluate our sense of the tradeoffs that arise between free and a positive price. In this piece, I offer a series of specific examples of resources offered without charge, for a positive price, or for a flat fee (“all-you-can-eat”). I conclude by assessing the characteristics that shape pricing structure for these resources.

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Securing Online Advertising: Rustlers and Sheriffs in the New Wild West

Edelman, Benjamin. “Securing Online Advertising: Rustlers and Sheriffs in the New Wild West.” In Beautiful Security, edited by Andy Oram and John Viega. O’Reilly Media, Inc., 2009. (Korean translation.)

Read the news of recent computer security guffaws, and it’s striking how many problems stem from online advertising. Advertising is the bedrock of web sites that are provided without charge to end users, so advertising is everywhere. But advertising security gaps are equally widespread: from “malvertisement” banner ads pushing rogue anti-spyware software, to click fraud, to spyware and adware, the security lapses of online advertising are striking.

During the past five years, I have uncovered hundreds of online advertising scams defrauding thousands of users–not to mention all the web’s top merchants. This chapter summarizes some of what I’ve found–and what users and advertisers can do to protect themselves.

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Symbian, Google & Apple in the Mobile Space (teaching materials) with Fernando Suarez and Arati Srinivasan

Suarez, Fernando, Benjamin Edelman, and Arati Srinivasan. “Symbian, Google & Apple in the Mobile Space (A).” Harvard Business School Case 909-055, April 2009. (educator access at HBP. request a courtesy copy.)

Symbian, maker of a leading mobile smartphone operating system, faces new competition from Google and Apple. Symbian evaluates changes to its software and its relationships with distributors in order to meet these competitors.

Supplement:

Symbian, Google & Apple in the Mobile Space (B) – Supplement (HBP 909056)

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Windows Vista (teaching materials)

Edelman, Benjamin. “Windows Vista.” Harvard Business School Case 909-038, February 2009. (Revised December 2010.) (educator access at HBP. request a courtesy copy.)

Microsoft designs, modifies, publicizes, and distributes Windows Vista—against a backdrop of consumers already largely satisfied with their existing Windows XP systems. Microsoft must decide what features to include and what to drop, how to compete with its own installed base, and how to mobilize partners to offer Vista-compatible systems.

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Restaurant Promotions in 2015 (teaching materials)

Edelman, Benjamin. “Restaurant Promotions in 2015.” Harvard Business School Case 909-034, January 2009. (Revised July 2015.) (educator access at HBP. request a courtesy copy.)

A variety of services offer consumers discounts when dining at participating restaurants. This case examines four such services: Entertainment Book, Restaurant.com, Rewards Network, and Groupon. Despite key functional similarities, each of the services chooses an importantly different approach–different pricing, different benefits to consumers, different benefits to restaurants, and different underlying technologies.

Teaching Materials

Online Restaurant Promotions – Teaching Note (HBP 909063)

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Adverse Selection in Online ‘Trust’ Certifications

Edelman, Benjamin. “Adverse Selection in Online ‘Trust’ Certifications.” Proceedings of the International Conference on Electronic Commerce (2009): 205-212. (ACM International Conference Proceeding Series.)

Widely used online “trust” authorities issue certifications without substantial verification of recipients’ actual trustworthiness. This lax approach gives rise to adverse selection: the sites that seek and obtain trust certifications are actually less trustworthy than others. Using a new dataset on web site safety, I demonstrate that sites certified by the best-known authority, TRUSTe, are more than twice as likely to be untrustworthy as uncertified sites. This difference remains statistically and economically significant when restricted to “complex” commercial sites. In contrast, competing certification system BBBOnline imposes somewhat stricter requirements and appears to provide a certification of positive, albeit limited, value.

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Running Out of Numbers? The Impending Scarcity of IP Addresses and What To Do About It

Edelman, Benjamin. “Running Out of Numbers: Scarcity of IP Addresses and What To Do About It.” Auctions, Market Mechanisms and Their Applications 14 (2009): 95-106. (Springer-Verlag Lecture Notes of the Institute for Computer Science.) (Featured in Working Knowledge: When the Internet Runs Out of IP Addresses) (Circulated in 2008 as Running Out of Numbers? The Impending Scarcity of IP Addresses and What To Do About It.)

The Internet’s current numbering system is nearing exhaustion: Existing protocols allow only a finite set of computer numbers (“IP addresses”), and central authorities will soon deplete their supply. I evaluate a series of possible responses to this shortage: Sharing addresses impedes new Internet applications and does not seem to be scalable. A new numbering system (“IPv6”) offers greater capacity, but network incentives impede transition. Paid transfers of IP addresses would better allocate resources to those who need them most, but unrestricted transfers might threaten the Internet’s routing system. I suggest policies to create an IP address “market” while avoiding major negative externalities–mitigating the worst effects of v4 scarcity, while obtaining price discovery and allocative efficiency benefits of market transactions.

Disclosure: I provide advice to ARIN’s counsel on matters pertaining to v6 transition, v4 exhaustion, and possible revisions to ARIN’s v4 transfer policy. But this paper expresses only my own views – not the views of ARIN, its Board, or its staff. I write on my own behalf, not for ARIN, nor at ARIN’s instruction or request.

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Ad Classification at Right Media (teaching materials)

Edelman, Benjamin. “Ad Classification at Right Media.” Harvard Business School Case 909-032, December 2008. (Revised June 2009.) (educator access at HBP. request a courtesy copy.)

Right media considers systems and policies to make sure that ads are only shown on web sites where they are appropriate, and vice versa. Setting standards is particularly challenging given the large and growing marketplace, the numerous participants, their diverse requirements, and the dynamics of policy enforcement when market participants are competing intensely.

Teaching materials:

Ad Classification at Right Media – Teaching Note (HBP 909037)

Ad Classification at Right media – Slide Supplement (HBP 911038)

Ad Classification at Right media – Slide Supplement (widescreen) (HBP 914054)

Ad Classification at Right media – Pre-Class Slides (HBP 911037)

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CPC/CPA Hybrid Bidding in a Second Price Auction

Edelman, Benjamin, and Hoan Lee. “CPC/CPA Hybrid Bidding in a Second Price Auction.” Harvard Business School Working Paper, No. 09-074, December 2008.

We develop a model of online advertising in which each advertiser chooses from multiple advertising measurement metrics–paying either for each click on its ads (CPC), or for each purchase that follows an ad-click (CPA). Our analysis extends classic auction results by allowing players to make bids using two different pricing schemes, while the driving information for bidders’ endogenous selection–the conversion rate–is hidden from the seller. We show that the advertisers with the most productive sites prefer to pay CPC, while advertisers with lower quality sites prefer to pay CPA–a result that may be viewed as counterintuitive since low quality sites cannot proudly tout their conversion rates. This result holds even if an ad platform’s assessment of site quality is correct in expectation. We also show that by offering both CPC and CPA, an ad platform can weakly increase its revenues compared to offering either alternative alone.

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Typosquatting: Unintended Adventures in Browsing

Edelman, Benjamin. “Typosquatting: Unintended Adventures in Browsing.” Cybercrime Gets Personal, McAfee Security Journal (fall 2008): 34-37.

Typosquatting is the practice of registering domain names, identical to or confusingly similar to trademarks and famous names, in hopes that users will accidentally request these sites–whereupon they will receive, typically, advertisements. This piece presents the basic typosquatting business model, based on my analysis of more than 80,000 typosquatting domain names. I analyze the advertising intermediaries that make typosquatting profitable, and I assess the legislation and litigation that are beginning to put a check on this practice.