Digital Content Strategies
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.
|Date of creation:||Feb 2013|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.business.uzh.ch|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009.
"Business Models for Media Firms: Does Competition Matter for How They Raise Revenue?,"
INFORMS, vol. 28(6), pages 1112-1128, 11-12.
- Hans Jarle Kind & Tore Nilssen & Lars Sørgard, 2009. "Business Models for Media Firms: Does Competition Matter for how they Raise Revenue?," CESifo Working Paper Series 2713, CESifo Group Munich.
- Tülin Erdem & Michael P. Keane, 1996. "Decision-Making Under Uncertainty: Capturing Dynamic Brand Choice Processes in Turbulent Consumer Goods Markets," Marketing Science, INFORMS, vol. 15(1), pages 1-20.
- V. Joseph Hotz & Mo Xiao, 2013.
"Strategic Information Disclosure: The Case Of Multiattribute Products With Heterogeneous Consumers,"
Western Economic Association International, vol. 51(1), pages 865-881, 01.
- V. Joseph Hotz & Mo Xiao, 2006. "Strategic Information Disclosure: The Case of Multi-Attribute Products with Heterogeneous Consumers," NBER Working Papers 11937, National Bureau of Economic Research, Inc.
- David Godes & Elie Ofek & Miklos Sarvary, 2009. "Content vs. Advertising: The Impact of Competition on Media Firm Strategy," Marketing Science, INFORMS, vol. 28(1), pages 20-35, 01-02.
- Milgrom, Paul & Roberts, John, 1986.
"Price and Advertising Signals of Product Quality,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 796-821, August.
- Hemant K. Bhargava & Vidyanand Choudhary, 2008. "Research Note--When Is Versioning Optimal for Information Goods?," Management Science, INFORMS, vol. 54(5), pages 1029-1035, May.
- Wilson, Robert, 1985. "Multi-dimensional signalling," Economics Letters, Elsevier, vol. 19(1), pages 17-21.
- Simon P. Anderson & Régis Renault, 2006.
American Economic Review,
American Economic Association, vol. 96(1), pages 93-113, March.
- Boom, Anette, 2004.
""Download for Free" - When Do Providers of Digital Goods Offer Free Samples?,"
Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems
70, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Boom, Anette, 2004. ""Download for Free": When do providers of digital goods offer free samples?," Discussion Papers 2004/28, Free University Berlin, School of Business & Economics.
- Monic Sun, 2011. "Disclosing Multiple Product Attributes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 195-224, 03.
- Kapil Bawa & Robert Shoemaker, 2004. "The Effects of Free Sample Promotions on Incremental Brand Sales," Marketing Science, INFORMS, vol. 23(3), pages 345-363, November.
- Amir Heiman & Bruce McWilliams & Zhihua Shen & David Zilberman, 2001. "Learning and Forgetting: Modeling Optimal Product Sampling Over Time," Management Science, INFORMS, vol. 47(4), pages 532-546, April.
- Marc Rysman, 2009. "The Economics of Two-Sided Markets," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 125-43, Summer.
- Cheng, Hsing Kenneth & Tang, Qian Candy, 2010. "Free trial or no free trial: Optimal software product design with network effects," European Journal of Operational Research, Elsevier, vol. 205(2), pages 437-447, September.
- Tülin Erdem & Michael P. Keane & Baohong Sun, 2008. "A Dynamic Model of Brand Choice When Price and Advertising Signal Product Quality," Marketing Science, INFORMS, vol. 27(6), pages 1111-1125, 11-12.
- Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414.
- Yi Xiang & David A. Soberman, 2011. "Preview Provision Under Competition," Marketing Science, INFORMS, vol. 30(1), pages 149-169, 01-02.
When requesting a correction, please mention this item's handle: RePEc:zrh:wpaper:329. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Daniela Koller)
If references are entirely missing, you can add them using this form.