In Google we trust?

- We develop a model of the interacting markets for online content and offline products.
- Content providers and search engine are platforms related both vertically (product market) and horizontally (content market).
- We characterize the substitutability of search and display advertising and the incentives to distort search results.
- We offer comparative statics on the effects of key characteristics of the markets on equilibrium behavior.
- We analyze integration of the search engine into content provision and analyze welfare implications.

We examine the incentives of a monopolistic search engine, funded by advertising, to provide reliable search results. We distinguish two types of search results: sponsored and organic (not-paid-for). Organic results are most important in searches for online content, while sponsored results are more important in product searches. By modeling the underlying markets for online content and offline products, we can identify the sources of distortions for each type of result, and their interaction. This explicit treatment proves crucial for understanding, not only spillovers across markets, but also fundamental policy issues, such as the welfare effects of integration. In particular, integration of the engine with a small fraction of content providers is welfare-enhancing when incentives to distort are stronger for sponsored than organic search, but welfare-reducing in the opposite case.