Digital Content Strategies

Daniel Halbheer (), Florian Stahl (), Oded Koenigsberg () and Donald R. Lehmann ()
Additional contact information
Daniel Halbheer: Department of Business Administration (IBW), University of Zurich
Florian Stahl: Department of Business Administration (IBW), University of Zurich
Oded Koenigsberg: Department of Marketing, London Business School
Donald R. Lehmann: Marketing, Columbia Business School

No 329, Working Papers from University of Zurich, Department of Business Administration (IBW)

Abstract: This paper studies content strategies for online publishers of digital information goods. It examines sampling strategies and compares their performance to paid content and free content strategies. A sampling strategy, where some of the content is offered for free and consumers are charged for access to the rest, is known as a metered model in the newspaper industry. We analyze optimal decisions concerning the size of the sample and the price of the paid content when sampling serves the dual purpose of disclosing content quality and generating advertising revenue. We show in a reduced-form model how the publishers optimal ratio of advertising revenue to sales revenue is linked to characteristics of both the content market and the advertising market. We assume that consumers learn about content quality from the free samples in a Bayesian fashion. Surprisingly, we find that it can be optimal for the publisher to generate advertising revenue by offering free samples even when sampling reduces both prior quality expectations and content demand. In addition, we show that it can be optimal for the publisher to refrain from revealing quality through free samples when advertising effectiveness is low and content quality is high.

Keywords: Information Goods; Sampling; Content Pricing; Advertising; Dorfman-Steiner Condition; Pricing; Product Quality; Bayesian Learning; News Websites (search for similar items in EconPapers)
JEL-codes: L11 L15 L21 M21 M30 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2013-02
New Economics Papers: this item is included in nep-com, nep-cul, nep-cwa, nep-ict, nep-ipr, nep-pr~ and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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