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Will the Internet Destroy the News Media?

Susan Athey, Emilio Calvano, Joshua Gans


September 2010
Can Online Advertising Markets Save the
Media?

Susan Athey, Emilio Calvano, Joshua Gans


September 2010
Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Newspaper ad revenue and GDP (constant dollars)
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure


GDP and newspaper ad revenue drop during recessions. Inflation-adjusted
newspaper ad revenue stagnated way before the internet became popular.

Fall in advertising revenue


Note: growth stopped pre-Internet

Source: Newspaper Association of America

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue

Unbundling of classifieds

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Introduction Issues
Ad revenue by type (constant dollars) Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Online ad revenue is less than 5% of total newspaper ad revenue. Local retail ad


Media is under pressure
revenue has grown, but national brand advertising and classified have
declined.

Fall in advertising revenue

Unbundling of classifieds

Source: Newspaper Association of America

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue

Unbundling of classifieds

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue

Unbundling of classifieds

Web ad revenue low

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Introduction Issues
Ad revenue by type (proportions) Baseline Model
Extensions
Research Questions
Literature
Conclusion Outline

Media is under pressure


In the last 5 years, classified revenue has declined in relative terms and online
has grown, but is still a tiny fraction of total.

Fall in advertising revenue

Unbundling of classifieds

Web ad revenue low

Source: Newspaper Association of America

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue

Unbundling of classifieds

Web ad revenue low

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue Loss of ‘good’ journalism

Unbundling of classifieds

Web ad revenue low

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue Loss of ‘good’ journalism

Unbundling of classifieds Local newspaper bankruptcies

Web ad revenue low

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue Loss of ‘good’ journalism

Unbundling of classifieds Local newspaper bankruptcies

Web ad revenue low Rise of aggregators/blogs

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Introduction Issues

ent to newspapers
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

mScore, search
Media is under pressure
5%-40% of traffic
w sites

his monetizes as
ffic, this means
are drivingFall
about
in advertising revenue Loss of ‘good’ journalism
online ad
Unbundling of classifieds Local newspaper bankruptcies
venue is only 5%
Web ad revenue low Rise of aggregators/blogs

sent to
des the query
hat click, so we
kinds of clicks
s receive from
Will New Media Destroy the News Media? 2 /48
Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Media is under pressure

Fall in advertising revenue Loss of ‘good’ journalism

Unbundling of classifieds Local newspaper bankruptcies

Web ad revenue low Rise of aggregators/blogs

Will New Media Destroy the News Media? 2 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

New media hysterics

Will New Media Destroy the News Media? 3 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

New media hysterics


... online ads sell at rates that are a fraction of those
for print, for simple reasons of competition. “In a print
world you had pretty much a limited amount of
inventory — pages in a magazine,” says Domenic
Venuto, managing director of the online marketing
firm Razorfish. “In the online world, inventory has
become infinite.”

Will New Media Destroy the News Media? 3 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

New media hysterics


... online ads sell at rates that are a fraction of those
for print, for simple reasons of competition. “In a print
world you had pretty much a limited amount of
inventory — pages in a magazine,” says Domenic
Venuto, managing director of the online marketing
firm Razorfish. “In the online world, inventory has
become infinite.”
(from the NYT, May 2010)

Will New Media Destroy the News Media? 3 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

New media hysterics


... online ads sell at rates that are a fraction of those
for print, for simple reasons of competition. “In a print
world you had pretty much a limited amount of
inventory — pages in a magazine,” says Domenic
Venuto, managing director of the online marketing
firm Razorfish. “In the online world, inventory has
become infinite.”
(from the NYT, May 2010)

•Attention is still scarce


Will New Media Destroy the News Media? 3 /48
Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

New media hysterics


... online ads sell at rates that are a fraction of those
for print, for simple reasons of competition. “In a print
world you had pretty much a limited amount of
inventory — pages in a magazine,” says Domenic
Venuto, managing director of the online marketing
firm Razorfish. “In the online world, inventory has
become infinite.”
(from the NYT, May 2010)

•Attention is still scarce


•Advertisers still want to grab attention
Will New Media Destroy the News Media? 3 /48
Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

... while the advertising challenges remain

Will New Media Destroy the News Media? 4 /48


Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

... while the advertising challenges remain


“I know that half of my advertising dollars are wasted … I
just don’t know which half.”
(John Wanamaker)

“Newspaper readers are ‘better’ than Web visitors. Online


readers are a notoriously fickle bunch, and apparently are
getting more so by the day. Web visitors barely stick
around, yet they are counted in broad traffic statistics as if
they were the same as the reader who lingers over his
Sunday paper.”
(Paul Farhi, Washington Post)
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Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Research Questions

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Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Research Questions

Focus on the advertising funding impact of the Internet

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Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Research Questions

Focus on the advertising funding impact of the Internet

What can explain the reduction in advertising revenue?

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Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Research Questions

Focus on the advertising funding impact of the Internet

What can explain the reduction in advertising revenue?

Can technology reverse any decline?

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Introduction Issues
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Research Questions

Focus on the advertising funding impact of the Internet

What can explain the reduction in advertising revenue?

Can technology reverse any decline?

Provide a full equilibrium analysis

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Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

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Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Advertisers

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Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Advertisers

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Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$ $$

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$ $$

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$ $$

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$ $$

or

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$0 $$

or

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$0 $$

or and

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$0 $$

or and

Will New Media Destroy the News Media? 6 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Traditional Media Economics

Readers/Viewers Outlet Advertisers

$0 $$

or and

Anderson-Coate:
total ad revenue independent of no. of outlets
Will New Media Destroy the News Media? 6 /48
Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

This Paper

Readers/Viewers Outlet Advertisers

$0 $$

or and

Will New Media Destroy the News Media? 7 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

This Paper

Readers/Viewers Outlet Advertisers

$0 $$

and

Will New Media Destroy the News Media? 7 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

This Paper

Readers/Viewers Outlet Advertisers

$0 $$

and and

Will New Media Destroy the News Media? 7 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

This Paper

Readers/Viewers Outlet Advertisers

$0 $$

and and ?

Will New Media Destroy the News Media? 7 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

This Paper

Readers/Viewers Outlet Advertisers

$0 $$

and ? and ?

Will New Media Destroy the News Media? 7 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching


Technologically easy to spread attention across multiple outlets

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching


Technologically easy to spread attention across multiple outlets
Cheap access to multiple outlets (browsing)

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching


Technologically easy to spread attention across multiple outlets
Cheap access to multiple outlets (browsing)
Reduced costs of learning about a variety of outlets (aggregators, social
networks and search)

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching


Technologically easy to spread attention across multiple outlets
Cheap access to multiple outlets (browsing)
Reduced costs of learning about a variety of outlets (aggregators, social
networks and search)
Questions

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching


Technologically easy to spread attention across multiple outlets
Cheap access to multiple outlets (browsing)
Reduced costs of learning about a variety of outlets (aggregators, social
networks and search)
Questions
What happens to advertising revenue as increase switching?

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching


Technologically easy to spread attention across multiple outlets
Cheap access to multiple outlets (browsing)
Reduced costs of learning about a variety of outlets (aggregators, social
networks and search)
Questions
What happens to advertising revenue as increase switching?
What happens to the returns to adopting tracking technologies?

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Switching and the Internet

Our contention is that the Internet has facilitated consumer switching


Technologically easy to spread attention across multiple outlets
Cheap access to multiple outlets (browsing)
Reduced costs of learning about a variety of outlets (aggregators, social
networks and search)
Questions
What happens to advertising revenue as increase switching?
What happens to the returns to adopting tracking technologies?
What are the incentives to engage in practices that reduce switching?

Will New Media Destroy the News Media? 8 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers
Anderson-Coate (2005): pure multi-homers increases competition for advertisers

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers
Anderson-Coate (2005): pure multi-homers increases competition for advertisers
Ambrus-Reisinger (2006): assume diminishing returns to multi-homing advertisers

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers
Anderson-Coate (2005): pure multi-homers increases competition for advertisers
Ambrus-Reisinger (2006): assume diminishing returns to multi-homing advertisers
In each, broadcasters compete on ‘ad disutility’

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers
Anderson-Coate (2005): pure multi-homers increases competition for advertisers
Ambrus-Reisinger (2006): assume diminishing returns to multi-homing advertisers
In each, broadcasters compete on ‘ad disutility’
Our focus is on the efficiency of matches

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers
Anderson-Coate (2005): pure multi-homers increases competition for advertisers
Ambrus-Reisinger (2006): assume diminishing returns to multi-homing advertisers
In each, broadcasters compete on ‘ad disutility’
Our focus is on the efficiency of matches
Two-sided markets: need to focus on ‘quality’ of agents (Weyl)

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers
Anderson-Coate (2005): pure multi-homers increases competition for advertisers
Ambrus-Reisinger (2006): assume diminishing returns to multi-homing advertisers
In each, broadcasters compete on ‘ad disutility’
Our focus is on the efficiency of matches
Two-sided markets: need to focus on ‘quality’ of agents (Weyl)
With mixed-homing consumers, there is ‘pollution’ and hence, a role for
technologies and strategies to control ‘pollution’

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Mixed Single & Multi-Homing Consumers


Identification of competitive bottlenecks in two-sided markets
Gans-King (2000): mobile termination
Choi (2006), Armstrong-Wright (2009): use of exclusivity/tying to ensure this
Allowing for multi-homing consumers
Anderson-Coate (2005): pure multi-homers increases competition for advertisers
Ambrus-Reisinger (2006): assume diminishing returns to multi-homing advertisers
In each, broadcasters compete on ‘ad disutility’
Our focus is on the efficiency of matches
Two-sided markets: need to focus on ‘quality’ of agents (Weyl)
With mixed-homing consumers, there is ‘pollution’ and hence, a role for
technologies and strategies to control ‘pollution’
Could use targeting: Athey-Gans (2010), Bergemann-Bonatti (2010)

Will New Media Destroy the News Media? 9 /48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Our Contribution

Will New Media Destroy the News Media? 10/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Our Contribution

Our model provides for mixed single and multi-homing consumers


(stochastically driven)

Will New Media Destroy the News Media? 10/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Our Contribution

Our model provides for mixed single and multi-homing consumers


(stochastically driven)
Examines what this does to the single and multi-homing choices of
advertisers

Will New Media Destroy the News Media? 10/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Our Contribution

Our model provides for mixed single and multi-homing consumers


(stochastically driven)
Examines what this does to the single and multi-homing choices of
advertisers
Sorting determined in an equilibrium model

Will New Media Destroy the News Media? 10/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching


Perfect tracking

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching


Perfect tracking
The impact of switching on ad pricing/profits

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching


Perfect tracking
The impact of switching on ad pricing/profits
Incentives to adopt tracking technology

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching


Perfect tracking
The impact of switching on ad pricing/profits
Incentives to adopt tracking technology
The impact of blogs

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching


Perfect tracking
The impact of switching on ad pricing/profits
Incentives to adopt tracking technology
The impact of blogs

Extensions (Future)

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching


Perfect tracking
The impact of switching on ad pricing/profits
Incentives to adopt tracking technology
The impact of blogs

Extensions (Future)
Local news provision/geo-targeting

Will New Media Destroy the News Media? 11/48


Introduction Policy Issue
Baseline Model Research Questions
Extensions Literature
Conclusion Outline

Outline

Baseline model of consumer switching


Perfect tracking
The impact of switching on ad pricing/profits
Incentives to adopt tracking technology
The impact of blogs

Extensions (Future)
Local news provision/geo-targeting
Ad-platform market structure

Will New Media Destroy the News Media? 11/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements

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Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time
Content

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time
Content
Nothing special about news

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time
Content
Nothing special about news
Model applies to any content

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time
Content
Nothing special about news
Model applies to any content
Simplifying assumptions

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time
Content
Nothing special about news
Model applies to any content
Simplifying assumptions
Two outlets

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time
Content
Nothing special about news
Model applies to any content
Simplifying assumptions
Two outlets
Exogenous readership allocation/outlet quality

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Model Elements
Fundamentals
Limited consumer attention
Fixed over relevant time
Some opportunity to switch between outlets
Advertisers value impressions to consumers
Indifferent as to when impressions are over a relevant time
Content
Nothing special about news
Model applies to any content
Simplifying assumptions
Two outlets
Exogenous readership allocation/outlet quality
Symmetric outlets in terms of readership

Will New Media Destroy the News Media? 12/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Consumers

Consumers (readers/viewers)
Endowed with 2 periods of attention
If given the opportunity to choose, choose outlet i with probability xi
Opportunity to choose (switch) arrives in each period with probability ρ

Outlets have two types of consumers


Single-homing (choose only one outlet)
Multi-homing (visit both outlets)

Will New Media Destroy the News Media? 13/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon

x1

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon

x1

1− ρ
Stay

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon

ρ
Choose

x1

1− ρ
Stay

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay

x1

1− ρ
Stay

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay

x1

1− ρ
Stay

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay x1ρ x1

x1

1− ρ
Stay

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay x1ρ x1

x1

1− ρ x1 (1 − ρ )
Stay

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay x1ρ x1

x1

1− ρ x1 (1 − ρ )
Stay

x2

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay x1ρ x1

x1

1− ρ x1 (1 − ρ )
Stay

ρ
x2 Choose

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay x1ρ x1

x1

1− ρ x1 (1 − ρ )
Stay

ρ x1
x2 Choose Switch to 1

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Morning Afternoon
x1
ρ
Choose Stay x1ρ x1

x1

1− ρ x1 (1 − ρ )
Stay

ρ x1
x2 Choose Switch to 1 x2 ρ x1

Will New Media Destroy the News Media? 14 /48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Advertisers

Each has a given value of impressing a given consumer, v


This value is realised per consumer regardless of attention
period the impression occurs in
Heterogeneous, distributed F(v) (special case, U[0,1])

Will New Media Destroy the News Media? 15/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlets

An outlet, i, has advertising capacity of ai per period of attention.

Thus, if they capture a consumer’s attention for t periods, the total number
of advertisers they can supply to is tai.

•When ρ = 0, outlet captures xi2ai units of attention.


•When ρ > 0, captures 2ai units of attention from some consumers and ai
from others.

Will New Media Destroy the News Media? 16/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Types of Ad Pricing

Per placement: advertisers pay for space


Physical newspaper ads
TV or radio slots
Per impression: advertisers pay each time ad is viewed
Banner ads on webpages
Per click: advertisers pay each time ad is clicked
Ads alongside search results

Here, we will model all ad pricing as per impression

Will New Media Destroy the News Media? 17/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

First Best (per consumer)


Having described the fundamentals, we can now describe the first best in
the advertising market.
Suppose that a ads can be impressed on a consumer each period

Price

vs
1-q

2a Quantity (Advertisers)
Will New Media Destroy the News Media? 18/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

Will New Media Destroy the News Media? 19/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

The Impression Game

Morning Afternoon

Outlet 1

Outlet 2

If Starbucks single-homes, it misses impressions.


If Starbucks multi-homes, it wastes impressions.
Will New Media Destroy the News Media? 19/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Benchmark Case (ρ = 0)
In the monopoly benchmark, all advertisers multi-home. With consumers
single-homing, the first best is realised. With endogenous ad capacity, this
equivalence would not hold.

Price

vm
1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 20/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Customer Types

Will New Media Destroy the News Media? 21/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Customer Types

Dil = Share loyal to i in a given period


D s = Share switching in a given period

Will New Media Destroy the News Media? 21/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Customer Types

Dil = xi − xi (1 − xi )ρ
D s = 2 ρ x1 x2

Will New Media Destroy the News Media? 21/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

Will New Media Destroy the News Media? 22/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

Imagine a platform (competitively supplied)

Will New Media Destroy the News Media? 22/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

Imagine a platform (competitively supplied)


Can track consumers as they move across outlets

Will New Media Destroy the News Media? 22/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

Imagine a platform (competitively supplied)


Can track consumers as they move across outlets
Can sell impressions to a consumer (regardless of outlet)

Will New Media Destroy the News Media? 22/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

Imagine a platform (competitively supplied)


Can track consumers as they move across outlets
Can sell impressions to a consumer (regardless of outlet)

Derive outlet advertising profits

Will New Media Destroy the News Media? 22/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l
D 1

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l l
D 1 D
2

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l l s
D 1 D
2 D

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l l s
D 1 D
2 D
2a1

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l l s
D 1 D
2 D
2a1 2a2

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l l s
D 1 D
2 D
2a1 2a2 a1 + a2

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

Pooled w/o Tracking


l l s
D 1 D
2 D
2a1 2a2 a1 + a2

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l s l
D 1
D D2
2a1 a1 + a2 2a2

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l s l
D 1
D D2
2a1 a1 + a2 2a2

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Perfect Ad-Tracking

l s l
D 1
D D 2
2a1 a1 + a2 2a2

p1 = 1 − F(2a1 ) p12 = 1 − F(a1 + a2 ) p2 = 1 − F(2a2 )

Will New Media Destroy the News Media? 23/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profits and Switching

π i = F (1 − ai − a j )ai D + F (1 − 2ai )2ai D


−1 s −1
i
l

Will New Media Destroy the News Media? 24/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profits and Switching

π i = F (1 − ai − a j )ai D + F (1 − 2ai )2ai D


−1 s −1
i
l

↑ρ

Will New Media Destroy the News Media? 24/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profits and Switching

π i = F (1 − ai − a j )ai D + F (1 − 2ai )2ai D


−1 s −1
i
l

↑ρ Shift from loyals


to switchers

Will New Media Destroy the News Media? 24/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profits and Switching

π i = F (1 − ai − a j )ai D + F (1 − 2ai )2ai D


−1 s −1
i
l

↑ρ Shift from loyals


↑ πi
to switchers

Will New Media Destroy the News Media? 24/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profits and Switching

π i = F (1 − ai − a j )ai D + F (1 − 2ai )2ai D


−1 s −1
i
l

↑ρ Shift from loyals


↑ πi
to switchers

( )
if F −1 (1 − ai − a j ) − F −1 (1 − 2ai ) x j > 0 or ai > a j

Will New Media Destroy the News Media? 24/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profit Comparisons

π i = F (1 − a1 − a2 )ai D + F (1 − 2ai )2ai D


−1 s −1 l

π i = D F (1 − 2ai )2ai
l −1

Will New Media Destroy the News Media? 25/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profit Comparisons

π i = (D + 2D )F (1 − 2a)a
s l −1

π i = D F (1 − 2a)2a
l −1

Will New Media Destroy the News Media? 25/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Profit Comparisons

π i = xi F (1 − 2a)2a
−1

= π i = xi F (1 − 2a)2a −1

Will New Media Destroy the News Media? 25/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Pure Multi-Homing

Will New Media Destroy the News Media? 26/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Pure Multi-Homing

Contrary to the model ...

Will New Media Destroy the News Media? 26/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Pure Multi-Homing

Contrary to the model ...


suppose all consumers are switchers.

Will New Media Destroy the News Media? 26/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Pure Multi-Homing

Contrary to the model ...


suppose all consumers are switchers.
Optimal advertiser strategy is to single-home.

Will New Media Destroy the News Media? 26/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Pure Multi-Homing

Contrary to the model ...


suppose all consumers are switchers.
Optimal advertiser strategy is to single-home.
No wasted impressions.

Will New Media Destroy the News Media? 26/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Pure Multi-Homing

Contrary to the model ...


suppose all consumers are switchers.
Optimal advertiser strategy is to single-home.
No wasted impressions.
Same outcome as under perfect tracking.

Will New Media Destroy the News Media? 26/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Intra-Outlet Tracking

No tracking (Butters, 1977; Athey-Gans, 2010; Bergemann-Bonatti, 2010)


Content-based tracking
Frequency-based tracking
Internal tracking

Here, we will consider the frequency-based tracking case

Will New Media Destroy the News Media? 27/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Multi-Home

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Multi-Home θ12 = D + D + D
l
1
l
2
3
4
s

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Multi-Home θ12 = D + D + D
l
1
l
2
3
4
s

Multi-Home (2 on i)

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Multi-Home θ12 = D + D + D
l
1
l
2
3
4
s

Multi-Home (2 on i)

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Multi-Home θ12 = D + D + D
l
1
l
2
3
4
s

Multi-Home (2 on i)

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Multi-Home θ12 = D + D + D
l
1
l
2
3
4
s

Multi-Home (2 on i) θ12′ = 1

Will New Media Destroy the News Media? 28/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Missed and Wasted Impressions


Expected Unique Impressions

Single-Home on i θi = D + D
l
i
1
2
s

Multi-Home θ12 = D + D + D
l
1
l
2
3
4
s

Multi-Home (2 on i) θ12′ = 1

θ12 ≤ θ1 + θ 2 = θ12′ for ρ > 0


Will New Media Destroy the News Media? 28/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impression Prices

Will New Media Destroy the News Media? 29/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impression Prices
Assume that outlets cannot price discriminate between
switchers and loyal consumers.

Will New Media Destroy the News Media? 29/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impression Prices
Assume that outlets cannot price discriminate between
switchers and loyal consumers.
Under symmetry (x1 = x2), can impression prices differ?

Will New Media Destroy the News Media? 29/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impression Prices
Assume that outlets cannot price discriminate between
switchers and loyal consumers.
Under symmetry (x1 = x2), can impression prices differ?
If p1 > p2, 1 will only attract multi-homers while any
single-homers on 1 will bid up 2’s price.

Will New Media Destroy the News Media? 29/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impression Prices
Assume that outlets cannot price discriminate between
switchers and loyal consumers.
Under symmetry (x1 = x2), can impression prices differ?
If p1 > p2, 1 will only attract multi-homers while any
single-homers on 1 will bid up 2’s price.
If there are no single-homers on 1 (i.e., a1 sufficiently low
relative to a2), then there may be a price differential.

Will New Media Destroy the News Media? 29/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impression Prices
Assume that outlets cannot price discriminate between
switchers and loyal consumers.
Under symmetry (x1 = x2), can impression prices differ?
If p1 > p2, 1 will only attract multi-homers while any
single-homers on 1 will bid up 2’s price.
If there are no single-homers on 1 (i.e., a1 sufficiently low
relative to a2), then there may be a price differential.
So long as ad capacities are not too different, there is a
single impression price. Call this p.

Will New Media Destroy the News Media? 29/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

0
Will New Media Destroy the News Media? 30/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

Single-homer surplus = (D + D )(vi − p) l


i
1
2
s

0
Will New Media Destroy the News Media? 30/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

Single-homer surplus = (D + D )(vi − p) l


i
1
2
s

Multi-homer surplus = (D + D + D )v − p l
1
l
2
3
4
s

0
Will New Media Destroy the News Media? 30/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

Single-homer surplus = (D + D )(vi − p) l


i
1
2
s

Multi-homer surplus = (D + D + D )v − p l
1
l
2
3
4
s

Multi-homer surplus (2 on i)
= v − (2D + D + D )p
l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

Multi-homer surplus = (D + D + D )v − p l
1
l
2
3
4
s

Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

Multi-homer surplus = (D + D + D )v − p l
1
l
2
3
4
s

Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

Multi-homer surplus = (D + D + D )v − p l
1
l
2
3
4
s

vi
Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

Multi-homer surplus = (D + D + D )v − p l
1
l
2
3
4
s

p vi
Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

v12
D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

D lj + 12 D s
p v12
D lj + 14 D s
D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
Multi-homer surplus (2 on i)
= v − (2D + D + D )p l
i
l
j
3 s
0 2

Will New Media Destroy the News Media? 30/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

D lj + 12 D s
p v12
D lj + 14 D s
D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
1
4
D v > (D + D ) p
s
i
l 1
2
s

0
Will New Media Destroy the News Media? 30/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

(D + D )(vi − p) = 0
l
i
1
2
s

D lj + 12 D s
p v12
D lj + 14 D s
D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
1
4
D v > (D + D ) p
s
i
l 1
2
s

0
Will New Media Destroy the News Media? 30/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers


v12
(D + D )(vi − p) = 0
l
i
1
2
s

D lj + 12 D s
p v12
D lj + 14 D s
D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
1
4
D v > (D + D ) p
s
i
l 1
2
s

0
Will New Media Destroy the News Media? 30/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Single & Multi-Homing Advertisers

1
Dil + 12 D s
p v12′
1
4
D s
(D + D )(vi − p) = 0
l
i
1
2
s

D lj + 12 D s
p v12
D lj + 14 D s
D (v − p) + D (v − 2 p) > 0
l
j
1
4
s

p vi
1
4
D v > (D + D ) p
s
i
l 1
2
s

0
Will New Media Destroy the News Media? 30/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
(D + D )3(1 − v12
l 1
2′) s

1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi

0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
(D + D )3(1 − v12
l 1
2′) s

1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi
Market Demand for
Impressions
0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
(D + D )3(1 − v12
l 1
2′) s

1
D s
p v12′
4
(D + D )2(v12
l
′ − v12 )
1
2
s

D lj + 21 D s
D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi
Market Demand for Market Supply of
Impressions Impressions
0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
(D + D )3(1 − v12
l 1
2′) s

p v12′
1
4
D s
2a1 D + 2a2 D
l
1
l
2
(D + D )2(v12
l
′ − v12 )
1 s

D lj + 21 D s
2
+(a1 + a2 )D s

D lj + 41 D s p v12
(D + D )(v12 − vi )
l 1
2
s

p vi
Market Demand for Market Supply of
Impressions Impressions
0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing

Dil + 12 D s
1
D s
p v12′
4

D lj + 21 D s a1 + a2 = 12 (v12 − vi ) + (v12 ' − v12 ) + 23 (1 − v12 ' )


D lj + 41 D s p v12

p vi
Market Demand for Market Supply of
Impressions Impressions
0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Market Clearing


v12
Ds (2 − D )
s s
p= D s
Dil + 12 (3 − 2(a1 + a2 ))
v12 D
p
1 4 s+ D (2 − D )
s

vi
Market Demand for Market Supply of
Impressions Impressions
0
Will New Media Destroy the News Media? 31/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Equilibrium Prices

⎧ D s (2 − D s )
⎪ (3 − 2(a1 + a2 ))
⎪ 4 + D (2 − D )
s s 1
D >p
s

p=⎨ if 2

⎪ 2(2 − D )s 1
D ≤p
s

⎪ (1 − (a1 + a2 )) 2

⎩ 4− D s

Will New Media Destroy the News Media? 32/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Equilibrium Prices

⎧ D s (2 − D s )
⎪ (3 − 2(a1 + a2 ))
⎪ 4 + D (2 − D )
s s 1
D >p
s

p=⎨ if 2

⎪ 2(2 − D )s 1
D ≤p
s

⎪ (1 − (a1 + a2 )) 2

⎩ 4− D s

s
D low Profits higher under perfect tracking

Will New Media Destroy the News Media? 32/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Equilibrium Prices

⎧ D s (2 − D s )
⎪ (3 − 2(a1 + a2 ))
⎪ 4 + D (2 − D )
s s 1
D >p
s

p=⎨ if 2

⎪ 2(2 − D )s 1
D ≤p
s

⎪ (1 − (a1 + a2 )) 2

⎩ 4− D s

s
D low Profits higher under perfect tracking

D s
high Profits may be lower under perfect tracking

Will New Media Destroy the News Media? 32/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

Price

1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 33/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

a1 = a2 = a
Price

1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 33/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

a1 = a2 = a
Price
p= 2 − Ds
4 − Ds
2(1 − 2a)

1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 33/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

a1 = a2 = a
Price
p= 2 − Ds
4 − Ds
2(1 − 2a)

vc 1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 33/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
The impression price changes both the number of
advertisers and their mix

Price

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 34/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
The impression price changes both the number of
advertisers and their mix

Price
Demand from Multi-homers

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 34/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
The impression price changes both the number of
advertisers and their mix

Price
Demand from Multi-homers

Demand from Single-homers

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 34/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
The impression price changes both the number of
advertisers and their mix

Price
Demand from Multi-homers
4−ρ
(q − 2a)
ρ

Demand from Single-homers

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 34/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (Low)
The impression price changes both the number of
advertisers and their mix

Price
Demand from Multi-homers
4−ρ
(q − 2a)
ρ

vc Demand from Single-homers

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 34/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

Price

1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 35/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

a1 = a2 = a
Price

1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 35/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

a1 = a2 = a
Price
p=
D s (2 − D s )
4 + D (2 − D )
s s( 3 − 4a )

1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 35/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
Reduction in demand for impressions -- advertisers prefer to accept missing
impressions rather than pay for wasted impressions

a1 = a2 = a
Price
p=
D s (2 − D s )
4 + D (2 − D )
s s( 3 − 4a )

vc 1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 35/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
The impression price changes both the number of
advertisers and their mix

Price

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 36/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
The impression price changes both the number of
advertisers and their mix
Demand from Multi-homers
Price

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 36/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
The impression price changes both the number of
advertisers and their mix
Demand from Multi-homers
Price

Demand from Single-homers

1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 36/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
The impression price changes both the number of
advertisers and their mix
Demand from Multi-homers
Price

Demand from Single-homers

Demand from Multi-homers+


1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 36/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
The impression price changes both the number of
advertisers and their mix
Demand from Multi-homers
Price
4−ρ
(q − 2a)
ρ

Demand from Single-homers

Demand from Multi-homers+


1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 36/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Switching (High)
The impression price changes both the number of
advertisers and their mix
Demand from Multi-homers
Price
4−ρ
(q − 2a)
ρ
vc
Demand from Single-homers

Demand from Multi-homers+


1-q

2a
Quantity (Advertisers)
Will New Media Destroy the News Media? 36/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Adoption of Perfect Tracking?

Will New Media Destroy the News Media? 37/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Adoption of Perfect Tracking?

When consumer switching is low, outlets can profit from adopting perfect
tracking.

Will New Media Destroy the News Media? 37/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Adoption of Perfect Tracking?

When consumer switching is low, outlets can profit from adopting perfect
tracking.
But as internal tracking improves, the incentives to do so diminish

Will New Media Destroy the News Media? 37/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Adoption of Perfect Tracking?

When consumer switching is low, outlets can profit from adopting perfect
tracking.
But as internal tracking improves, the incentives to do so diminish
When consumer switching is high, outlet profits may fall with perfect
tracking.

Will New Media Destroy the News Media? 37/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Adoption of Perfect Tracking?

When consumer switching is low, outlets can profit from adopting perfect
tracking.
But as internal tracking improves, the incentives to do so diminish
When consumer switching is high, outlet profits may fall with perfect
tracking.
Competitive pressures may not drive adoption as this requires inter-outlet
coordination

Will New Media Destroy the News Media? 37/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Adoption of Perfect Tracking?

When consumer switching is low, outlets can profit from adopting perfect
tracking.
But as internal tracking improves, the incentives to do so diminish
When consumer switching is high, outlet profits may fall with perfect
tracking.
Competitive pressures may not drive adoption as this requires inter-outlet
coordination
When capacity choice is endogenous, outlet asymmetry drives adoption
issues.

Will New Media Destroy the News Media? 37/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Endogenous Ad-Capacity

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai

πi =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 38/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Endogenous Ad-Capacity

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4 − Ds

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai

πi =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 38/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Endogenous Ad-Capacity

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4 − Ds

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
3

πi =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 38/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Endogenous Ad-Capacity

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4 − Ds

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
3

πi = ac =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai
1
2

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 38/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Endogenous Ad-Capacity

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4 − Ds

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
3

πi = ac =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai
1
2

π i = D (1 − 2ai )2ai
l
am = 1
4

Will New Media Destroy the News Media? 38/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Endogenous Ad-Capacity

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4 − Ds

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
3

πi = ac =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai
1
2

π i = D (1 − 2ai )2ai
l
am = 1
4

Perfect tracking restores efficiency but competition


remains
Will New Media Destroy the News Media? 38/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Comparison with Monopoly

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai

πi =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 39/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Comparison with Monopoly

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai

πi =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 39/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Comparison with Monopoly

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
4

πi =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 39/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Comparison with Monopoly

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
4

πi = ac =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai
3
8

π i = D (1 − 2ai )2ai
l

Will New Media Destroy the News Media? 39/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Comparison with Monopoly

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
4

πi = ac =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai
3
8

π i = D (1 − 2ai )2ai
l
am = 1
4

Will New Media Destroy the News Media? 39/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Comparison with Monopoly

π i = (1 − a1 − a2 )ai D + (1 − 2ai )2ai D


s l
a pt = 1
4

πi = 2 − Ds
4 − Ds
(1 − a1 − a2 )2ai ac = 1
4

πi = ac =
s s
D (2 − D )
s
4 + D (2 − D
s
)
(3 − 2(a1
+ a 2
))ai
3
8

π i = D (1 − 2ai )2ai
l
am = 1
4

Perfect tracking restores full efficiency

Will New Media Destroy the News Media? 39/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impact of Switchers

Profits

s
D
Will New Media Destroy the News Media? 40/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Impact of Switchers
With ‘no tracking’ and
perfect tracking there is no
impact of switchers

Profits

s
D
Will New Media Destroy the News Media? 40/48
Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlet Asymmetries

Will New Media Destroy the News Media? 41/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlet Asymmetries

One outlet has higher quality and readership share

Will New Media Destroy the News Media? 41/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlet Asymmetries

One outlet has higher quality and readership share


Imperfect tracking: advertisers sort onto that outlet first. Commands a
premium (explains the iTV premium)

Will New Media Destroy the News Media? 41/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlet Asymmetries

One outlet has higher quality and readership share


Imperfect tracking: advertisers sort onto that outlet first. Commands a
premium (explains the iTV premium)
Perfect tracking and no switching: does not impact on relative prices

Will New Media Destroy the News Media? 41/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlet Asymmetries

One outlet has higher quality and readership share


Imperfect tracking: advertisers sort onto that outlet first. Commands a
premium (explains the iTV premium)
Perfect tracking and no switching: does not impact on relative prices
Suggests that competition for readers may be more intense under
imperfect than under perfect tracking (trade off with reduction in
advertising revenue)

Will New Media Destroy the News Media? 41/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlet Asymmetries

One outlet has higher quality and readership share


Imperfect tracking: advertisers sort onto that outlet first. Commands a
premium (explains the iTV premium)
Perfect tracking and no switching: does not impact on relative prices
Suggests that competition for readers may be more intense under
imperfect than under perfect tracking (trade off with reduction in
advertising revenue)
One outlet has more effective advertising (targeting)

Will New Media Destroy the News Media? 41/48


Introduction
Elements
Baseline Model
Perfect Tracking
Extensions
Imperfect Tracking
Conclusion

Outlet Asymmetries

One outlet has higher quality and readership share


Imperfect tracking: advertisers sort onto that outlet first. Commands a
premium (explains the iTV premium)
Perfect tracking and no switching: does not impact on relative prices
Suggests that competition for readers may be more intense under
imperfect than under perfect tracking (trade off with reduction in
advertising revenue)
One outlet has more effective advertising (targeting)
High value advertisers sort onto that outlet first. Other outlet will expand
capacity and frequency to replicate (Athey-Gans, 2010)

Will New Media Destroy the News Media? 41/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Easy generalisations:

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Easy generalisations:
Many outlets: more switching caused by competition

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Easy generalisations:
Many outlets: more switching caused by competition
Heterogenous outlets: vertical quality causes additional sorting

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Easy generalisations:
Many outlets: more switching caused by competition
Heterogenous outlets: vertical quality causes additional sorting
Capacity constrained advertisers: competition without switching

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Easy generalisations:
Many outlets: more switching caused by competition
Heterogenous outlets: vertical quality causes additional sorting
Capacity constrained advertisers: competition without switching

Difficult generalisations:

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Easy generalisations:
Many outlets: more switching caused by competition
Heterogenous outlets: vertical quality causes additional sorting
Capacity constrained advertisers: competition without switching

Difficult generalisations:
Many attention periods: then get n-homers

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Generalisations

Easy generalisations:
Many outlets: more switching caused by competition
Heterogenous outlets: vertical quality causes additional sorting
Capacity constrained advertisers: competition without switching

Difficult generalisations:
Many attention periods: then get n-homers
Repeat ads on an outlet: helps high value advertisers increase impressions
but there is diminishing marginal returns.

Will New Media Destroy the News Media? 42/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Blogs and Non-Ad Attention


Suppose that consumers can devote attention to blogs or public
broadcasters (with probability xb)

Price

1-2a

a Quantity (Impressions)
Will New Media Destroy the News Media? 43/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Blogs and Non-Ad Attention


Suppose that consumers can devote attention to blogs or public
broadcasters (with probability xb)

Price

1-2a

a (1 − xb (1 − ρ(1 − ρ )(1 − xb ))
Quantity (Impressions)
Will New Media Destroy the News Media? 43/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Blogs and Non-Ad Attention


Suppose that consumers can devote attention to blogs or public
broadcasters (with probability xb)

Price

1-2a

a (1 − xb (1 − ρ(1 − ρ )(1 − xb ))
Quantity (Impressions)
Will New Media Destroy the News Media? 43/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Blogs and Non-Ad Attention


Suppose that consumers can devote attention to blogs or public
broadcasters (with probability xb)

Price

vb

1-2a

a (1 − xb (1 − ρ(1 − ρ )(1 − xb ))
Quantity (Impressions)
Will New Media Destroy the News Media? 43/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Blogs and Non-Ad Attention


Suppose that consumers can devote attention to blogs or public
broadcasters (with probability xb)

Price Blogs cause impression prices


to rise

vb

1-2a

a (1 − xb (1 − ρ(1 − ρ )(1 − xb ))
Quantity (Impressions)
Will New Media Destroy the News Media? 43/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Blogs and Non-Ad Attention


Suppose that consumers can devote attention to blogs or public
broadcasters (with probability xb)

Price Blogs cause impression prices


to rise
... but compete attention from
outlets.

vb

1-2a

a (1 − xb (1 − ρ(1 − ρ )(1 − xb ))
Quantity (Impressions)
Will New Media Destroy the News Media? 43/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Blogs and Non-Ad Attention


Suppose that consumers can devote attention to blogs or public
broadcasters (with probability xb)

Price Blogs cause impression prices


to rise
... but compete attention from
outlets.
May increase profits if xb low.
vb

1-2a

a (1 − xb (1 − ρ(1 − ρ )(1 − xb ))
Quantity (Impressions)
Will New Media Destroy the News Media? 43/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators

Will New Media Destroy the News Media? 44/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators
“There are those who think they have a right to take our news content and use it for
their own purpose without contributing a penny to its production. Content creators bear
all the costs, while aggregators enjoy many of the benefits. In the long term, this is
untenable.” (Rupert Murdoch)

Will New Media Destroy the News Media? 44/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators
“There are those who think they have a right to take our news content and use it for
their own purpose without contributing a penny to its production. Content creators bear
all the costs, while aggregators enjoy many of the benefits. In the long term, this is
untenable.” (Rupert Murdoch)

What is the impact of aggregators?

Will New Media Destroy the News Media? 44/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators
“There are those who think they have a right to take our news content and use it for
their own purpose without contributing a penny to its production. Content creators bear
all the costs, while aggregators enjoy many of the benefits. In the long term, this is
untenable.” (Rupert Murdoch)

What is the impact of aggregators?


May take some share of capacity (creating switchers)

Will New Media Destroy the News Media? 44/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators
“There are those who think they have a right to take our news content and use it for
their own purpose without contributing a penny to its production. Content creators bear
all the costs, while aggregators enjoy many of the benefits. In the long term, this is
untenable.” (Rupert Murdoch)

What is the impact of aggregators?


May take some share of capacity (creating switchers)
Switchers may be of ‘lower quality’ than loyals:

Will New Media Destroy the News Media? 44/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators
“There are those who think they have a right to take our news content and use it for
their own purpose without contributing a penny to its production. Content creators bear
all the costs, while aggregators enjoy many of the benefits. In the long term, this is
untenable.” (Rupert Murdoch)

What is the impact of aggregators?


May take some share of capacity (creating switchers)
Switchers may be of ‘lower quality’ than loyals:
(i) less likely to yield conversions (equivalent to a reduction in value of
hitting or missing switching)

Will New Media Destroy the News Media? 44/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators
“There are those who think they have a right to take our news content and use it for
their own purpose without contributing a penny to its production. Content creators bear
all the costs, while aggregators enjoy many of the benefits. In the long term, this is
untenable.” (Rupert Murdoch)

What is the impact of aggregators?


May take some share of capacity (creating switchers)
Switchers may be of ‘lower quality’ than loyals:
(i) less likely to yield conversions (equivalent to a reduction in value of
hitting or missing switching)
(ii) require more impressions to generate a conversion (increase demand
from high value advertisers)

Will New Media Destroy the News Media? 44/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Aggregators
“There are those who think they have a right to take our news content and use it for
their own purpose without contributing a penny to its production. Content creators bear
all the costs, while aggregators enjoy many of the benefits. In the long term, this is
untenable.” (Rupert Murdoch)

What is the impact of aggregators?


May take some share of capacity (creating switchers)
Switchers may be of ‘lower quality’ than loyals:
(i) less likely to yield conversions (equivalent to a reduction in value of
hitting or missing switching)
(ii) require more impressions to generate a conversion (increase demand
from high value advertisers)
Individual impact depends on asymmetric readership and value of information
gathered.
Will New Media Destroy the News Media? 44/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Role for a Paywall?

Will New Media Destroy the News Media? 45/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Role for a Paywall?


“No [it’s not a two way street with Google sending traffic] What’s the point of
someone coming occasionally who likes a headline they see on Google? Sure we go
out and say we have so many millions of visitors. The fact is that there is not enough
advertising in the world to go around to make all the websites profitable. We’d rather
have fewer people coming to our websites but paying. They don’t suddenly become
loyal readers of our websites.” (Rupert Murdoch)

Will New Media Destroy the News Media? 45/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Role for a Paywall?


“No [it’s not a two way street with Google sending traffic] What’s the point of
someone coming occasionally who likes a headline they see on Google? Sure we go
out and say we have so many millions of visitors. The fact is that there is not enough
advertising in the world to go around to make all the websites profitable. We’d rather
have fewer people coming to our websites but paying. They don’t suddenly become
loyal readers of our websites.” (Rupert Murdoch)

Paywall involves expending cost to move share from switchers to loyal


readers

Will New Media Destroy the News Media? 45/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Role for a Paywall?


“No [it’s not a two way street with Google sending traffic] What’s the point of
someone coming occasionally who likes a headline they see on Google? Sure we go
out and say we have so many millions of visitors. The fact is that there is not enough
advertising in the world to go around to make all the websites profitable. We’d rather
have fewer people coming to our websites but paying. They don’t suddenly become
loyal readers of our websites.” (Rupert Murdoch)

Paywall involves expending cost to move share from switchers to loyal


readers
Unilateral action will do this for both outlets

Will New Media Destroy the News Media? 45/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Role for a Paywall?


“No [it’s not a two way street with Google sending traffic] What’s the point of
someone coming occasionally who likes a headline they see on Google? Sure we go
out and say we have so many millions of visitors. The fact is that there is not enough
advertising in the world to go around to make all the websites profitable. We’d rather
have fewer people coming to our websites but paying. They don’t suddenly become
loyal readers of our websites.” (Rupert Murdoch)

Paywall involves expending cost to move share from switchers to loyal


readers
Unilateral action will do this for both outlets
Trade-off loss in overall readership with increase in ‘quality’ of readers

Will New Media Destroy the News Media? 45/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Role for a Paywall?


“No [it’s not a two way street with Google sending traffic] What’s the point of
someone coming occasionally who likes a headline they see on Google? Sure we go
out and say we have so many millions of visitors. The fact is that there is not enough
advertising in the world to go around to make all the websites profitable. We’d rather
have fewer people coming to our websites but paying. They don’t suddenly become
loyal readers of our websites.” (Rupert Murdoch)

Paywall involves expending cost to move share from switchers to loyal


readers
Unilateral action will do this for both outlets
Trade-off loss in overall readership with increase in ‘quality’ of readers
Increase efficiency of ad-market and limit competition

Will New Media Destroy the News Media? 45/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Role for a Paywall?


“No [it’s not a two way street with Google sending traffic] What’s the point of
someone coming occasionally who likes a headline they see on Google? Sure we go
out and say we have so many millions of visitors. The fact is that there is not enough
advertising in the world to go around to make all the websites profitable. We’d rather
have fewer people coming to our websites but paying. They don’t suddenly become
loyal readers of our websites.” (Rupert Murdoch)

Paywall involves expending cost to move share from switchers to loyal


readers
Unilateral action will do this for both outlets
Trade-off loss in overall readership with increase in ‘quality’ of readers
Increase efficiency of ad-market and limit competition
Blocking search engines may be considered a similar move
Will New Media Destroy the News Media? 45/48
Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Informational Requirements

Will New Media Destroy the News Media? 46/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Informational Requirements

Baseline model: outlets can identify if a consumer has seen an ad already on


their site

Will New Media Destroy the News Media? 46/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Informational Requirements

Baseline model: outlets can identify if a consumer has seen an ad already on


their site
Cannot tell if consumer has seen an ad on another site

Will New Media Destroy the News Media? 46/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Informational Requirements

Baseline model: outlets can identify if a consumer has seen an ad already on


their site
Cannot tell if consumer has seen an ad on another site

Can outlets use fact that consumer has visited other sites to price
discriminate?

Will New Media Destroy the News Media? 46/48


Introduction Generalisations
Baseline Model Impact of Blogging
Extensions Aggregators
Conclusion Paywalls

Informational Requirements

Baseline model: outlets can identify if a consumer has seen an ad already on


their site
Cannot tell if consumer has seen an ad on another site

Can outlets use fact that consumer has visited other sites to price
discriminate?
If not, perfect tracking generates Cournot outcomes but without inefficiency
in the baseline model

Will New Media Destroy the News Media? 46/48


Introduction
Baseline Model
Extensions
Conclusion

Future Directions

• Model with mixture of single and multi-homing consumers


• Wasted impressions
• Frequency capping technologies
• Examine content provision
• Competition for consumers
• Bundling
• Average versus marginal content quality
• Local outlets (extend Athey-Gans, AER, 2010)

Will New Media Destroy the News Media? 47/48


Introduction
Baseline Model
Extensions
Conclusion

Will the Internet Kill the News Media?

Will New Media Destroy the News Media? 48/48

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