Intermediaries - businesses that provide connections between supplier and end purchaser.
Internet information intermediaries derive revenues from those same companies they are supposed to advise their clients about . This introduces conflicts of interest . This report explores the efficiency of intermediation markets and examines the contractual arrangements governing the use of listing and directory services ; such as Google orYahoo .Billboard and click –through pricing are compared. Billboard pricing guarantees an audience for a given price . Click –through is a pay –as-you-go scheme where advertisers pay only for the number of customers they actually got . Those two types of contract lead to different motivations for the intermediary . The first doesn’t encourage it to monitor the relationship customer-suppler ; since its result is not under its province anymore . The second gives more leeway to the intermediary and may force it to monitor the messages sent from the supplier to the customer through the intermediary :as it imposes no limits on how many customers a supplier may get ; there is a risk that only the most profitable messages are transmitted ; instead of those that are of interest to the customer . Those two dimensions (profitability to the supplier vs. interest to the customer )are not always concomitant .
The report models Internet intermediaries as advisors to customers . Intermediaries receive queries for information about products or information . They answer those requests by providing an assessment or a ranking of the alternative offerings . Customers expect to be given an objective assessment of the adequateness between a supplier's good and their needs . Intermediaries are caught between repeat customers whom they want to retain ; and suppliers who pay to get listed among the options available to customers . Intermediaries provide a forum for suppliers to make claims about their products . Those claims can be exaggerated ; leading some customers to be misled into buying the product .( By Eric Goldman)
A two-sided media market is modeled where media outlets offer informational content to users and in turn sell their audience to the providers of that content . The intermediary contracts with suppliers to provide customers with information about their product ; and users then decide ;based on how objective the information was ; whether to keep on using the intermediary's service . Competitors can divert an intermediary's clientele by offering content providers more advantageous contracting schemes . Since the intermediary's service is to offer information about a product ; it loses customers if it cannot provide content .
This report is concerned with the concentration of media markets ; more particularly that of search engines on the internet . Search engines control the access to information about products for many consumers and there is a natural tendency to monopolization of intermediation services. Indeed ; it is often better from the point of view of welfare that there be an unique intermediary as this allows every member to benefit from maximum network effects – the value of an intermediary to its clients ; and the larger that pool ; the higher its value . The usual criticism of monopoly for information intermediation is that it leads to the price exclusion of too many players ; so that a competitive setting can increase welfare by lowering prices for intermediation services . Google, a search engine, AOL, both an Internet service provider and a portal, Amazon, a book seller, my Simon, a comparison shoppingservice, Free Markets, an e-marketplace and exchange, all are among the many listing and directories services, online newspapers, newsletters and search engines that provide information to customers aboutproducts. Information intermediaries select information, organize it and present it to customers. (Alexander Gaudeul)
References:
(1) (http://www.oecd.org/dataoecd/8/59/45997042.pdf.
(2)OECD Project on Internet Intermediaries
By Eric Goldman
http://blog.ericgoldman.org/cgi-bin/web/mt-t.cgi/1177.
(3) http://agaudeul.free.fr
Alexander Gaudeul.
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