The economic effects of domestic search engines on the development of the online advertising market

A few global search engine platforms, notably Google and Yahoo!, have achieved worldwide dominance in the search engine market. However, some domestic search engine platforms, such as Naver in South Korea and Baidu in China, have come to dominate their domestic markets in competition with global search engine platforms. This study quantified the economic effects of domestic search engines on the development of the online advertising market. Using a country-level dynamic panel of 46 countries from 2009 to 2013, we investigated the change in the size of the online advertising market caused by the existence of a domestic search engine. The results show that the development of a domestic search engine may lead to an increase in the size of the online advertising market: A country with its own domestic search engine platform(s) may have an average of 0.018% more online advertising intensity-which is defined as online advertising spending/GDP-than one without this type of platform. The reasons behind these results and the policy implications are also discussed.