The Google Way

Two-Sided Markets

Search engines, which finance free search results by selling advertising, use what economists call a two-sided market (sometimes called a double-sided market). All media—including television, radio, magazines, and newspapers—would be far more expensive if it weren't for advertising revenues. Other business sectors apply similar techniques: Your credit card appears to be free (or almost free) when you use it for purchases, but the merchant accepting the card pays a fee to the company that issued it and you, of course, pay interest if you carry a balance.

In every case—search engine, newspaper, or credit card—the company offers its products or services to two markets: reader and advertiser or customer and merchant. The more subscriptions ...