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Digital Content Strategies

Author

Listed:
  • 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)

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.

Suggested Citation

  • Daniel Halbheer & Florian Stahl & Oded Koenigsberg & Donald R. Lehmann, 2013. "Digital Content Strategies," Working Papers 329, University of Zurich, Department of Business Administration (IBW).
  • Handle: RePEc:zrh:wpaper:329
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    References listed on IDEAS

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    Cited by:

    1. Kretschmer, Tobias & Peukert, Christian, 2014. "Video killed the radio star? Online music videos and digital music sales," LSE Research Online Documents on Economics 60276, London School of Economics and Political Science, LSE Library.
    2. Zhi Li & De-qing Tan, 2017. "Two-Stage Dynamic Pricing and Advertising Strategies for Online Video Services," Discrete Dynamics in Nature and Society, Hindawi, vol. 2017, pages 1-8, October.
    3. Yi, Zelong & Li, Fan & Ma, Lijun, 2019. "The impact of distribution channels on trial-version provision with a positive network effect," Omega, Elsevier, vol. 85(C), pages 115-133.
    4. Anja Lambrecht & Avi Goldfarb & Alessandro Bonatti & Anindya Ghose & Daniel Goldstein & Randall Lewis & Anita Rao & Navdeep Sahni & Song Yao, 2014. "How do firms make money selling digital goods online?," Marketing Letters, Springer, vol. 25(3), pages 331-341, September.

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    More about this item

    Keywords

    Information Goods; Sampling; Content Pricing; Advertising; Dorfman-Steiner Condition; Pricing; Product Quality; Bayesian Learning; News Websites;
    All these keywords.

    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; Personnel Economics - - Business Economics - - - Business Economics
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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