Attention Markets and the Allocation of Cognitive Scarcity

If you can capture their attention, you can sell to them.  In a market economy with many substitutes for almost any individual good, firms must constantly seek to get the best features of their products in front of customers.  The firms’ demand to capture consumers’ limited attention has created attention markets.  If a profit-seeking firm can capture a percentage of a consumer’s attention, there is a chance that attention could result in a sale.

History of Attention Markets

Firms competing for customers’ attention is nothing new.  At some point in the modern era, the situation largely shifted from consumers desiring information, meaning they would pay for quality news, to companies offering news for free in order to include paid advertising with it.  Consumers rarely pay for information any more; advertisers do.  In exchange, advertisers get a shot at receiving more revenue than they spent (receiving a positive return on investment) and increasing their profits.

The penny presses of the 1830s in the United States created the first attention markets in urban areas as people could, for the first time, access information very cheaply.  A single penny paid by consumers did not cover the cost of printing, with the majority of the cost being subsidized by advertisers.  In the 1920s, advertisers paid for radio broadcasts, allowing those who owned radios to listen to content for free.  Although advertisers began the radio and television eras by sponsoring shows directly, they quickly switched to purchasing advertising time.  By the 1950s, consumers were hearing and seeing the commercial ads we are familiar with today.

Economics of Attention Markets

Attention as a Scarce Resource (Limited Supply)

Humans have limited attention spans, with sleep, labor, and other necessary life functions taking considerable time away from our ability to consume media (and, therefore, ads).  Out of humans’ available leisure time, advertisers must fight for their attention.  Thanks to psychology and physiology, not all human attention is equal: the primacy and recency effects explain that consumers retain most of what they saw first and last, with less retained of what was seen in between.  Therefore, out of the finite attention of consumers, advertisers are vying even harder for advertising spots at the very beginning and very end of content, raising advertising costs in these zones considerably.

Platforms Competing for Limited User Attention (High Demand)

It’s not just a handful of television networks seeking consumer attention like existed 50 years ago.  Today, television consists of many cable and streaming options, combining television shows and movies onto singular platforms.  Radio also consists of new options, with satellite radio and Internet streaming options serving as popular substitutes to old-fashioned, free-use radio.  Social media, now a quarter century old, attracts millions of users per hour, especially to endless scroll and short-form video platforms like Tik Tok, Instagram Reels, and YouTube Shorts.  Instead of five or six major platforms seeking consumer attention in 1976, there are dozens of media giants seeking it in 2026.

Advertising Models and Attention Monetization

Modern technology allows media companies to track user data, including how frequently users interact with content.  This has allowed media platforms to monetize consumer attention and charge more money for ads linked to desirable content.  Today, this allows social media influencers to receive advertising dollars for attracting thousands, or even millions, of viewers.  If data reveal that an influencer is very popular and can “go viral,” companies will pay a premium to have their products attached to this content.  This can occur through traditional ads appearing in that influencer’s video feed or through product promotion, with the influencer overtly or subtly utilizing the product and praising its merits.

Behavioral Biases and Addiction (Increasing Supply)

Intense competition to appeal to fickle consumers has led to content and website features that are often accused of being addictive.  Particularly among young Internet users, these dark nudges are seen as manipulative tools to convince consumers to buy more than they should.  Addictive media content, complemented by dark nudges, can cause consumers to spend lots more time and attention online than they should.  Although this can lead to increased consumer spending in the short run, long run revenue to firms can be hindered by Internet users struggling to maintain employment due to addiction and other mental health struggles caused by excessive media consumption.

Market Failure Potential of Attention Markets

Trying to extract all available consumer attention in pursuit of advertising investment - getting consumers to buy products after watching ads - can lead to long-term economic problems.

Increasing Opportunity Cost of Time Spent Online

Traditionally, economists considered improvements in technology to result in increased productivity and, therefore, total output.  However, data suggest that the rise of the smartphone and endless-scroll media has actually led to a decrease in the productivity of the average Western worker.  The smartphone is often not used as a tool to improve the speed and accuracy of output, but rather as a digital escape into leisure.  

Highly competitive attention markets have increased the distractedness of the modern worker, creating high opportunity costs of time spent online during working hours.  Thirty years ago, wanting to engage in 30 minutes of media leisure meant watching a television episode at home, resulting in zero productivity loss at work.  Today, a worker can easily scroll Tik Tok for 30 minutes per day, costing the firm hundreds of dollars in unfulfilled labor.

Welfare Implications of Attention Extraction

As digital media comes to consume more and more of our waking hours, affecting us as both consumers and producers, there are significant welfare implications.  Sadly, it appears that most citizens in developed nations are suffering both mentally and physically from the near-total proliferation of high-speed Internet and its media.  This is most pronounced among youth, who are the most ardent consumers of social media and streaming entertainment.  

To limit the harms caused to the mental health and educational attainment of youth, many jurisdictions have begun passing laws to limit cell phone and social media use in schools.  Others are passing laws to limit the ability of children and teens to register for social media accounts, deeming young teens too vulnerable to the addictive effects of constant Internet use.  However, many adult consumers are also heavily addicted to Internet content and will likely reject external attempts to limit their online activities.