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The Differentiated Effect of Advertising on Readership: Evidence from a Two-Sided Market Approach

Ivaldi, Marc and Muller-Vibes, Catherine (2018) The Differentiated Effect of Advertising on Readership: Evidence from a Two-Sided Market Approach. TSE Working Paper, n. 18-900, Toulouse

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Official URL: http://tse-fr.eu/pub/32557

Abstract

In this paper, we empirically analyze the French print media market by modeling the existence of a reciprocal effect between the size of the readership and the amount of advertising. For this two-sided platform, we measure the cross-effects of advertising on the readership and periodical popularity on advertising. By estimating a structural model of simultaneous demand equations, we quantify some crucial elements in designing pricing and product-differentiating strategies. We measure the impact of advertising on reader demand and find in the data that it has opposite effects depending on whether the publication presents informational or entertaining content. By taking into account the market interactions, we compute price and advertising elasticities. Our results show that advertisers targeting a specific category of the audience would choose its corresponding periodicals and would trade off the size of the readership for these periodicals and the advertising insert price changes. Also, advertising campaigns aimed at reaching a broader spectrum of the population should focus on popular titles and on titles for which demand is inelastic to ensure a more consistent impact of the campaign. Finally, for magazines with low price demand elasticity on the readers’ side, editors’ revenues could be improved by increasing prices. These combined effects should allow a publisher to generate positive margins from both sides of the market, for certain content categories.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2018
Place of Publication: Toulouse
Uncontrolled Keywords: Media, Advertising, Discrete Choice Model, Two-Sided Markets
JEL codes: C33 - Models with Panel Data
L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L52 - Industrial Policy; Sectoral Planning Methods
L82 - Entertainment; Media (Performing Arts, Visual Arts, Broadcasting, Publishing, etc.)
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 24 Apr 2018 11:17
Last Modified: 24 Jul 2018 12:32
OAI ID: oai:tse-fr.eu:32557
URI: http://publications.ut-capitole.fr/id/eprint/25880

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