Network Formation And The Structure Of The Commercial World Wide Web

In this paper the authors attempt to model the commercial World Wide Web as a directed graph emerging as the equilibrium of a game in which utility maximizing Web sites purchase (adver-tising) in-links from each other, while also setting the price of these links. It explores network formation in the presence of search engines and find that the higher the proportion of people using these, the more sites have an incentive to specialize in certain "content areas". The results have interesting practical implications for 'search-engine optimization', the pricing of online advertising as well as the choice of Internet business models. They also shed light on why Google can use the Web's link structure to rank sites by content.