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Targeted Advertising: The Role of Subscriber Characteristics in Media Markets

Author

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  • Chandra, Ambarish

Abstract

This paper seeks to establish the importance of targeted advertising in media markets. Using zip-code level circulation for US daily newspapers, I show that newspapers facing more competition have lower circulation prices but higher advertising prices than similar newspapers facing little or no competition. I explain this by showing that newspapers in more competitive markets are better able to segment readers according to their location and demographics. This leads to greater homogeneity in the characteristics of subscribers and raises advertisers' willingness to pay for such readers. The results imply a substantial benefit to advertisers and media firms from targeted advertising.

Suggested Citation

  • Chandra, Ambarish, 2008. "Targeted Advertising: The Role of Subscriber Characteristics in Media Markets," MPRA Paper 7955, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:7955
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    File URL: https://mpra.ub.uni-muenchen.de/7955/1/MPRA_paper_7955.pdf
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    Citations

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    Cited by:

    1. Dirk Bergemann & Alessandro Bonatti, 2010. "Targeting in Advertising Markets: Implications for Offline vs. Online Media," Cowles Foundation Discussion Papers 1758, Cowles Foundation for Research in Economics, Yale University.
    2. Anderson, Simon P. & Jullien, Bruno, 2016. "The advertising-financed business model in two-sided media markets," TSE Working Papers 16-632, Toulouse School of Economics (TSE).
    3. Susan Athey & Joshua S. Gans, 2010. "The Impact of Targeting Technology on Advertising Markets and Media Competition," American Economic Review, American Economic Association, vol. 100(2), pages 608-613, May.
    4. Lapo Filistrucchi & Tobias J. Klein, 2013. "Price Competition in Two-Sided Markets with Heterogeneous Consumers and Network Effects," Working Papers 13-20, NET Institute.
    5. Avi Goldfarb, 2014. "What is Different About Online Advertising?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 115-129, March.
    6. Anderson, Simon P & Waldfogel, Joel, 2015. "Preference Externalities in Media Markets," CEPR Discussion Papers 10835, C.E.P.R. Discussion Papers.
    7. Anindya Ghose & Sha Yang, 2009. "An Empirical Analysis of Search Engine Advertising: Sponsored Search in Electronic Markets," Management Science, INFORMS, vol. 55(10), pages 1605-1622, October.
    8. Van Cayseele, Patrick & Vanormelingen, Stijn, 2009. "Prices and Network Eects in Two-Sided Markets: the Belgian Newspaper Industry," Working Papers 2009/06, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
    9. Stefan Behringer & Lapo Filistrucchi, 2009. "Price Wars in Two-Sided Markets: The case of the UK Quality Newspapers," Working Papers 09-26, NET Institute, revised Dec 2009.
    10. Stühmeier, Torben, 2012. "Target Advertising and Market Transparency," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62021, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Targeted Advertising; Media Markets; Newspapers; Media Segmentation;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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