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

Marc Ivaldi and Catherine Muller-Vibes

No 18-900, TSE Working Papers from Toulouse School of Economics (TSE)

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.

Keywords: Media; Advertising; Discrete Choice Model; Two-Sided Markets (search for similar items in EconPapers)
JEL-codes: C33 L11 L52 L82 (search for similar items in EconPapers)
Date: 2018-03
New Economics Papers: this item is included in nep-com, nep-eur, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: The differentiated effect of advertising on readership: evidence from a two-sided market approach (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:32557

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