Media Competition on the Internet (original) (raw)
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Media Competition on the Internet1
2004
This paper presents a model of competition between two advertising- financed media firms, and we apply the model to analyze competition between por- tals on the Internet. First, we show that equilibrium prices of advertising are actually higher the less differentiated the portals are perceived to be. Second, we show that aggregate profit for the portals increases if they form
2002
This paper presents a model of media competition in a situation where the media are advertising-financed, but where the media consumers dislike the advertising. It is shown that the equilibrium prices of advertising are actually higher, and the profit levels lower, the less differentiated the medias are perceived to be. We apply the model to analyze the incentives for Internet portals to form alliances with their advertisers, and find that there exists a prisoners' dilemma where portals that are close substitutes end up in an equilibrium with no vertical alliances and low profit.
Competing with advertising resources
This paper presents a model of media competition with free entry when media operators are financed both from advertisers and viewers. The relation between advertising receipts and sales receipts, which are both complementary and antagonist, is different if media operators impose a price or a quantity to advertisers. Media operators are better off setting an advertising price than an advertising quantity. We establish a relationship between the equilibrium levels (advertising and entry) and the advertising technology. In particular, media operators do not gain by introducing advertising when they impose advertising quantities and when advertising exhibits constant returns to scale in the audience size. Under constant or increasing returns to scale in the audience size, we find an excessive level of entry and an insufficient level of advertising.
Competing with Advertising Resources (Preliminary and incomplete)
This paper presents a model of broadcast competition with free entry when broadcasters are nanced both from advertisers and viewers. The relation between advertising receipts and sales receipts, which are both complementary and antagonist, is dierent if broadcasters impose a price or a quantity to advertisers. Entry is always larger in an advertising price setting game. We establish a relationship between the equilibrium levels (advertising and entry) and the advertising technology. In particular, with constant return to scale in the audience, entry is not aected by advertising and consumers are better o.
ADVERTISING, COMPETITION AND ENTRY IN MEDIA INDUSTRIES a
J Ind Econ, 2009
This paper presents a model of media competition with free entry when media platforms are financed both from advertising receipts and customers' subscriptions. We establish a relationship between the equilibrium levels of prices, advertising and entry, the welfare maximizing levels and the advertising technology. Under constant or increasing returns to scale in the audience size, we find an excessive level of entry and an insufficient level of advertising. We then extend the analysis along several dimensions: the price as a strategic variable on the market for advertising, free media platforms and the media quality dimension.
Competition between Content Distributors in Two-Sided Markets
We analyze strategic interactions between two competing distributors of an independent TV channel. Consistent with most of the relevant markets, we assume that the distributors set enduser prices while the TV channel sets advertising prices. Within this framework we show that the distributors have incentives to internalize the fact that viewers dislike ads on TV, but no incentives to internalize how the TV-channel's profits from the advertising market are affected by end-user prices. This leads to some surprising results. First, we show that even undifferentiated distributors might make positive profits. Second, a TV channel might find it optimal to commit to not raising advertising revenue. Third, regulation of the advertising volume might be welfare improving even if the unregulated advertising level is too low from a social point of view. JEL-Code: L100.
The Economics of Internet Media
Handbook of Media Economics, 2016
We survey the economics literature on media as it applies to the Internet. The Internet is an important driver behind media convergence and connects information and communication technologies. While new Internet media share some properties with traditional media, several novel features have appeared: On the content side, aggregation by third parties that have no editorial policy and usergenerated content have become increasingly important. On the advertiser side, fine-tuned tailoring and targeting of ads based on individual user characteristics are common features on many Internet media and social networks. On the user side, we observe increased possibilities of time-shifting, multi-homing, and active search. These changes have gone hand-in-hand with new players entering media markets, including search engines and Internet service providers. Some of these players face novel strategic considerations, such as how to present search results. In response to these changes, an emerging economics literature focuses on the allocative and welfare implications of this new media landscape. This paper is an attempt to organize these contributions and provide a selective account of novel economic mechanisms that shape market outcomes of Internet media. A large body of work has focused on the advertising part of the industry, while some studies also look at content provision and the interaction between the two.
Competition between demand-side intermediaries in ad exchanges
2014
Online advertising constitutes one of the main sources of revenue for the majority of businesses on the web. Online advertising inventory was traditionally traded via bilateral contracts between publishers and advertisers, vastly through a number of intermediaries. However, what caused an explosion in the volume and, consequently, the revenue of online ads was the incorporation of auctions as the major mechanism for trading sponsored search ads in all major search engines. This reduced transaction costs and allowed for the advertisement of small websites which constitute the majority of Internet traffic. Auction-based markets were harder to establish in the display advertising industry due to the higher volume of inventory and the pre-existence of traditional intermediaries, often leading to inefficiencies and lack of transparency. Nevertheless, this has recently changed with the introduction of the ad exchanges, centralized marketplaces for the allocation of display advertising inv...
Specialized advertising media and product market competition
Journal of Economics, 2011
This paper studies the strategic relationship between a specialized communication medium and a product market. To that end, we formulate a model of informative advertising and price competition where the advertising fee is endogenously determined by the interaction between two firms producing a horizontally-differentiated good and a communication platform. We find that (i) when the subscription to the medium is free, the platform asks for high prices for its advertising services, which allows firms to raise their prices to the level where the marginal potential consumer achieves zero utility and (ii) a positive subscription fee generates cross-side externalities between the firms and subscribers, which can increase or decrease the equilibrium advertising fee. In particular, under a positive advertising externality, the platform tends to charge low advertising fees, thus triggering strong price competition between firms. We also show that less product differentiation or a lower consumer valuation of the goods can increase firms' profits, so a strategic connection between the product and the media markets can substantially affect the functioning of a differentiated product market.
Media market concentration, advertising levels, and ad prices
International Journal of Industrial Organization, 2012
Standard media economics models imply that increased platform competition decreases ad levels and that mergers reduce per-viewer ad prices. The empirical evidence, however, is mixed. We attribute the theoretical predictions to the combined assumptions that there is no advertising congestion and that viewers single-home. Allowing for crowding in viewer attention spans for ads may reverse standard results, as does allowing viewers to multi-home.