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

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  • Ivaldi, Marc
  • Muller-Vibes, Catherine

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.

Suggested Citation

  • Ivaldi, Marc & Muller-Vibes, Catherine, 2018. "The Differentiated Effect of Advertising on Readership: Evidence from a Two-Sided Market Approach," TSE Working Papers 18-900, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:32557
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    References listed on IDEAS

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    Cited by:

    1. Bakó, Barna & Horváth, Diána, 2020. "Termékdifferenciálás kétoldalú piacokon [Product differentiation on bilateral markets]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 1-13.

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    More about this item

    Keywords

    Media; Advertising; Discrete Choice Model; Two-Sided Markets;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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