Working Paper | HBS Working Paper Series | 2013

Exclusive Preferential Placement as Search Diversion: Evidence from Flight Search

by Benjamin Edelman and Zhenyu Lai

Abstract

We analyze the incentives for a two-sided intermediary to divert consumers to its favored destinations. Applied to Internet search engines, we investigate a diversion mechanism based on Google's exclusive award of preferential placement to its own services. Using web traffic data from a quasi-experiment involving the introduction of Flight Search, a Google travel search service, we identify and measure the impact of diverting search away from non-paid algorithmic links to competing online travel agencies. Controlling for search intent, we find that Google's differential placement of Flight Search across similar search queries led to an 85% increase in click-through rates for paid advertising and a 65% decrease in click-through rates for non-paid algorithmic search links to competing online travel agencies. As search engines increase monetization of clicks by integrating specialized services into search results, our analysis suggests that exclusive preferential placement disproportionately impacts traffic to top sites most likely relevant to users' requests.

Keywords: Fairness; Search Technology; Internet; Online Advertising; Travel Industry;

Citation:

Edelman, Benjamin, and Zhenyu Lai. "Exclusive Preferential Placement as Search Diversion: Evidence from Flight Search." Harvard Business School Working Paper, No. 13-087, April 2013. (data appendix.)