Digital Content Strategies
AbstractThis 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 publisher’s 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.
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Bibliographic InfoPaper provided by University of Zurich, Department of Business Administration (IBW) in its series Working Papers with number 329.
Length: 34 pages
Date of creation: Feb 2013
Date of revision:
Information Goods; Sampling; Content Pricing; Advertising; Dorfman-Steiner Condition; Pricing; Product Quality; Bayesian Learning; News Websites;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- M21 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics - - - Business Economics
- M30 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-09 (All new papers)
- NEP-COM-2013-03-09 (Industrial Competition)
- NEP-CUL-2013-03-09 (Cultural Economics)
- NEP-CWA-2013-03-09 (Central & Western Asia)
- NEP-ICT-2013-03-09 (Information & Communication Technologies)
- NEP-IPR-2013-03-09 (Intellectual Property Rights)
- NEP-MKT-2013-03-09 (Marketing)
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