Algorithmic Attention Rents: A theory of digital platform market power

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UCL Institute for Innovation and Public Purpose (IIPP) Working Paper Series: IIPP WP 2023-10

Authors:

• Tim O’Reilly | Founder, CEO, and Chairman of O’Reilly Media | Visiting Professor of Practice at UCL Institute for Innovation and Public Purpose (IIPP)
• Ilan Strauss | Senior Research Associate | UCL Institute for Innovation and Public Purpose (IIPP)
• Mariana Mazzucato | Founding Director and Professor in the Economics of Innovation and Public Value | UCL Institute for Innovation and Public Purpose (IIPP)

Reference:

O’Reilly, T., Strauss, I. and Mazzucato, M. (2023). Algorithmic Attention Rents: A theory of digital platform market power. UCL Institute for Innovation and Public Purpose, Working Paper Series (IIPP WP 2023-10). Available at: https://www.ucl.ac.uk/bartlett/public-purpose/wp2023-10

Abstract:

We outline a theory of algorithmic attention rents in digital aggregator platforms. We explore the way that as platforms grow, they become increasingly capable of extracting rents from a variety of actors in their ecosystems – users, suppliers, and advertisers – through their algorithmic control over user attention. We focus our analysis on advertising business models, in which attention harvested from users is monetized by reselling the attention to suppliers or other advertisers, though we believe the theory has relevance to other online business models as well. We argue that regulations should mandate the disclosure of the operating metrics that platforms use to allocate user attention and shape the “free” side of their marketplace, as well as details on how that attention is monetized.