Will The Internet Destroy The News Media?

Will the Internet Destroy the
News Media?
Susan Athey, Emilio Calvano & Joshua Gans
February 2011
Wednesday, 18 May 2011

On the Internet, no one
knows you’re a journalist.

Outline

Outline
Stylised facts

Outline
Stylised facts
Suggested theories

Outline
Stylised facts
Suggested theories
Main hypothesis

Outline
Stylised facts
Suggested theories
Main hypothesis
Idealized ad market

Outline
Stylised facts
Suggested theories
Main hypothesis
Idealized ad market
Realistic ad market

Outline
Stylised facts
Suggested theories
Main hypothesis
Idealized ad market
Realistic ad market
Positional advantage

Outline
Stylised facts
Suggested theories
Main hypothesis
Idealized ad market
Realistic ad market
Positional advantage
Conclusions

Stylised facts

The chart of doom
Newspaper Ad Revenue ($m)
Source: Newspaper Associa0on of America

The chart of doom

$50,000
$37,500
$25,000
$12,500
$0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

The chart of doom

$50,000
$37,500
$25,000
$12,500
$0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

The chart of doom
Newspaper Ad Revenue (1980 $m)
$30,000
$22,500
$15,000
$7,500
$0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Not just the economy
Newspaper Ad Revenue (% of GDP)

0.007
0.005
0.004
0.002
0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Not just circulation
Newspaper Ad Revenue (1980 $m) Daily Circula0on (‘000s)


$30,000 70,000
$22,500 62,500
$15,000 55,000
$7,500 47,500
$0 40,000
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008


$30,000 70,000
$22,500 62,500
$15,000 55,000
$7,500 47,500
$0 40,000
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Newspaper Ad Revenue

(1980 $ per paper sold)
$1.40
$1.05
$0.70
$0.35
$0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Not just classifieds


$30,000
$22,500
$15,000
$7,500
$0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008


$30,000
$22,500
$15,000
$7,500
$0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008


$30,000
$22,500
$15,000
$7,500
$0
1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

Suggested theories to
explain the decline

Ineffectiveness?

Ineffectiveness?
“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)

Ineffectiveness?

Ineffectiveness?

Ineffectiveness?

Supply of ad inventory

Supply of ad inventory
... 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)

Economic fundamentals

Attention is still scarce ...

Attention is still scarce ...
and advertisers still want to access that

attention.

Traditional business model

Establish a
platform

Establish a
platform

If you build it Establish a

they will come platform

$$
If you build it Establish a

they will come platform

$$
If you build it Establish a Sell access to

they will come platform consumers

$$ $$


Competitive Bottleneck
$$ $$


Focus of
investment and Competitive Bottleneck
competition
$$ $$


Focus of
investment and Competitive Bottleneck
competition
$ $$


Focus of
investment and Waterbed Effect Competitive Bottleneck
competition
$ $$


Focus of
investment and Waterbed Effect Competitive Bottleneck
competition
$ $$

Each new reader brings a new revenue stream

Disruption

Disruption
The Internet has disrupted the traditional

business model ...

Disruption
The Internet has disrupted the traditional

business model ...
need to wait for experiments to sort it

out.

Experiments

Experiments
Paywall for premium

content

Experiments
Paywall for premium

content
Paywall

Experiments
Paywall for premium

content
Paywall
Limited paywall

Experiments
Paywall for premium

content
Paywall
Limited paywall
Free+online

Experiments
Paywall for premium

content
Paywall
Limited paywall
Free+online
Free + offline only

Experiments
Paywall for premium

content
Paywall
Limited paywall
Free+online
Free + offline only

Main hypothesis

Only two facts

Only two facts
The Internet has facilitated consumer

switching between outlets

Only two facts
The Internet has facilitated consumer

switching between outlets
There is imperfect tracking between

outlets

Switching

Switching
Browsing

Switching
Browsing
Free content

Switching
Browsing
Free content
Aggregators, social
networks and
search

Switching
Browsing
Free content
Aggregators, social
networks and
search

Traditional Media Economics
$ $$

$ $$

$ $$

$ $$

$ $$
or

$ $$
or and

0 $$
or and

0 $$
or and
Anderson-Coate

Puzzles

Puzzles
Evidence that competition reduces ad prices

Puzzles
Outlets claim mergers will improve ad revenue

Puzzles
For-profit outlets object to lifting of ad

restrictions on public broadcasters

Puzzles
For-profit outlets object to lifting of ad

restrictions on public broadcasters
Larger outlets earn higher ad revenue per

consumer

This paper
0 $$
or and

This paper
0 $$
and

This paper
0 $$
and/or and

This paper
0 $$
and/or and ?

This paper
0 $$
?
and/or and ?

Model set-up

Advertising supply

Advertising supply
Two attention periods.

Advertising supply
Two outlets with ad capacity per unit of attention, ai.

Advertising supply
If they have opportunity to choose, consumers select outlet i with

probability xi.

Advertising supply

probability xi.
In a given period, the probability that a consumer can choose is ρ.

Advertising supply

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

Advertising supply

probability xi.
Dil = xi − xi (1 − xi )ρ
D s = 2 ρ x1 x2
i's ad inventory = Dil 2ai + D s ai

Advertiser demand

Advertiser demand
Advertisers want to impress each consumer once over

the two periods …

Advertiser demand
Advertisers want to impress each consumer once over

the two periods …
and have heterogeneous values (v) on impressing

consumers with distribution F(v); assumed to be U[0,1].

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2

The impression game
Morning Afternoon
Outlet 1
Outlet 2
If Starbucks single-homes, it misses impressions.

If Starbucks multi-homes, it wastes impressions.

The advertiser’s dilemma
Custom analysis of data provided to authors by

ComScore of 30 recent large, cross-outlet campaigns

The advertiser’s dilemma
Wasted
Impressions
Custom analysis of data provided to authors by

ComScore of 30 recent large, cross-outlet campaigns

Solving the dilemma

Solving the dilemma
No switching

Solving the dilemma
No switching
No tracking

Solving the dilemma
No switching
No tracking
Coordination in time

Solving the dilemma
No switching
No tracking
Pay per click

Solving the dilemma
No switching
No tracking
Pay per click
Perfect tracking

Idealized ad market

Perfect tracking

Perfect tracking
Technology

Perfect tracking
Browser
Technology
Plugin

Perfect tracking
Browser Send consumer

Technology
Plugin visits to network

Perfect tracking
Browser Send consumer No wasted

Technology
Plugin visits to network impressions

Perfect tracking

Technology
Offers

Perfect tracking

Technology
To advertisers: “Will
Offers impress specific consumer
x times in specified time
period regardless of site.”

Perfect tracking

Technology
To advertisers: “Will To outlets: “If you attract

Offers impress specific consumer consumers to your network
x times in specified time you will receive $ per
period regardless of site.” impression.”

Perfect tracking

Technology

Outcomes

Perfect tracking

Technology

Advertisers:
straightforward strategy,
Outcomes pay for impressions based
on prices sorted by
consumers type

Perfect tracking

Technology

Advertisers:
Outlets: outsource ad sales
on prices sorted by and compete for value
consumers type

Perfect tracking

Technology

Advertisers:
consumers type
Impediments

Perfect tracking

Technology

Advertisers:
consumers type
Will this reduce

Impediments advertiser demand? Will
outlets adopt this?

Perfect tracking

Technology

Advertisers:
consumers type
Will this reduce

Concerns over privacy
Impediments advertiser demand? Will
outlets adopt this? Ad network market power

Profit comparison
No switching π iNS = D l F −1 (1 − 2ai )2ai
Perfect tracking π iPT = F −1 (1 − a1 − a2 )ai D s + F −1 (1 − 2ai )2ai D l

Profit comparison
No switching π iNS = Dil F −1 (1 − 2a)2a
Perfect tracking π iPT = (D s + 2Dil )F −1 (1 − 2a)a

Profit comparison
No switching π iNS = xi F −1 (1 − 2a)2a
Perfect tracking π iPT = xi F −1 (1 − 2a)2a

Realistic ad market

Intra-outlet tracking
Content-based tracking
Frequency-based tracking
Internal tracking
Here, we will consider the frequency-based tracking case

Missed & wasted impressions
Expected Unique Impressions

Single-Home on i

Single-Home on i θ i = Dil + 12 D s

Multi-Home

Multi-Home θ12 = D1l + D2l + 43 D s

Multi-Home (2 on i)

Multi-Home (2 on i) θ12′ = 1

Multi-Home (2 on i) θ12′ = 1
θ12 ≤ θ1 + θ 2 = θ12′ for ρ > 0

Advertiser demand
Price
Quantity (Advertisers)

Advertiser demand
Price
Single-homing

Advertiser demand
To impress loyals, want

to multi-home … at the Price
cost of wasted switcher
impressions
Single-homing

Advertiser demand

impressions
Single-homing
Multi-homing

Advertiser demand

impressions
Single-homing
To impress switchers,
want to increase
Multi-homing
frequency … at the cost
of wasted loyal
impressions

Advertiser demand

impressions
Single-homing
want to increase
Multi-homing
of wasted loyal
impressions Multi-homing +
Frequency

Advertiser demand

impressions
Single-homing
want to increase
Multi-homing
of wasted loyal
impressions Multi-homing +
Frequency
Higher value
advertisers more
willing to bear costs

No switching
Price
Multi-homers
(1 impression)
Quantity (Impressions)

No switching
Price Supply
Multi-homers
(1 impression)
2a

No switching
Price Supply
v=1
Multi-homers
(1 impression)
2a

No switching
Price Supply
v=1
Multi-homers
(1 impression)
v=p
2a

No switching
Price Supply
v=1
Multi-homers
(1 impression)
v=p
2a

No switching
Price Supply
v=1
Multi-homers
(1 impression) p
v=p
2a

More switchers
Price Supply
v=1
Multi-homers
(1 impression)
Single- Single-
home on 1 home on 2
v=p
2a

More switchers
Price Supply
v=1
Multi-homers
(1 impression)
p
Single- Single-
home on 1 home on 2
v=p
2a

More switchers
Price Supply
v=1
↑ D s ⇒↓ p
Multi-homers
(1 impression)
p
Single- Single-
home on 1 home on 2
v=p
2a

High switchers
Price Supply
v=1
MH 2 on 1 MH 2 on 2
Multi-homers
(1 impression)
p
Single- Single-
home on 1 home on 2
v=p
2a

High switchers
Price Supply
v=1
MH 2 on 1 MH 2 on 2
Multi-homers
(1 impression)
p
Single- Single-
home on 1 home on 2
v=p
2a

High switchers
Price Supply
v=1
MH 2 on 1 MH 2 on 2
↑ D s ⇒↑ p
Multi-homers
(1 impression)
p
Single- Single-
home on 1 home on 2
v=p
2a

High switchers
Price Supply
v=1
MH 2 on 1 MH 2 on 2
↑ D s ⇒↑ p
Multi-homers if a high
(1 impression)
p
Single- Single-
home on 1 home on 2
v=p
2a

Incentives to adopt perfect tracking
Low ad capacity (a)

Profits
Ds

Low ad capacity (a)

Profits
Imperfect
Tracking
Ds

Low ad capacity (a)

Profits
Perfect
Tracking
Imperfect
Tracking
Ds

High ad capacity (a) Imperfect

Profits Tracking
Perfect
Tracking
Ds


Profits Tracking
Perfect
Tracking
Ds


Profits Tracking
Perfect
Tracking
Ds

Mergers

Mergers
Allow intra-outlet tracking

Mergers
Allow intra-outlet tracking Merge only if a and Ds not too high

Mergers
No intra-outlet tracking

Mergers
Neutral unless can price discriminate

between single and multi-homers

Mergers


Mergers

Mergers may increase profits even when Ds = 0

Public broadcasters & blogs
Price
Supply

Price
Supply
Blogs and other non-ad
content …

Price
Supply
content …
decrease available ad
capacity in the market …

Price
Supply
content …

Price
Supply
content …
and reduce adverse effect

of switching …

Price
Supply
content …

of switching …

Price
Supply
content …

of switching …
Causing impression prices

to rise.

Price
Supply
content …

of switching …
Causing impression prices

to rise.

Positional advantages
in advertising markets

Content quality

Content quality Paywalls

Content quality Paywalls Magnet content

Asymmetric Quality
x1 = x2
Low Ds High Ds
v=1 v=1
MH 2 on 1 MH 2 on 2
Multi-homers
(1 impression)
Multi-homers
(1 impression)
Single- Single-
Single- Single-
home on 1 home on 2
home on 1 home on 2
v=p v=p

Asymmetric Quality
x1 > x2
Low Ds High Ds
v=1 v=1
MH 2 on 1 MH 2 on 2
Multi-homers
(1 impression)
Multi-homers
(1 impression)
Single- Single-
Single- Single-
home on 1 home on 2
home on 1 home on 2
v=p v=p

Asymmetric Quality
x1 > x2
Low Ds High Ds
v=1 v=1
MH 2 on 2
Multi-homers
(1 impression)
Multi-homers
(1 impression)
Single-home on 1
v = p1 Single-home on 1
Single-home on 2 v = p1
Single-home on 2
v = p2 v = p2

Asymmetric Quality
x1 > x2
Low Ds High Ds
v=1 v=1
MH 2 on 2
Multi-homers
(1 impression)
Multi-homers
(1 impression)
Single-home on 1
v = p1 Single-home on 1
Single-home on 2
v = p2 v = p2
Outlet 1 gains a positional advantage

in the advertising market
Quality Investments

Quality Investments
Under perfect tracking

capturing an additional reader
increases profits in a linear
fashion.

Quality Investments

fashion.
Under imperfect tracking,

greater readership improves
position and so has a greater
increment to profit.

Quality Investments

fashion.
Under imperfect tracking,

position and so has a greater
Consider game where outlets

invest in quality
simultaneously

Quality Investments

fashion. Investment
0.20
Under imperfect tracking, 0.18

position and so has a greater 0.16
0.14
Consider game where outlets 0.6 0.7 0.8 0.9 1.0
invest in quality Quality Diﬀeren0al

simultaneously

Quality Investments

fashion. Investment
0.20

0.14
Perfect
Tracking

simultaneously

Quality Investments

fashion. Imperfect
Investment
0.20
Tracking

0.14
Perfect
Tracking

simultaneously

Quality Investments

fashion. Imperfect
Investment
0.20
Tracking
greater readership improves Competing

for Value
0.14
Perfect
Tracking

simultaneously

Quality Investments

fashion. Imperfect
Investment
0.20
Tracking
greater readership improves Competing

for Value
0.14
Perfect
Tracking

simultaneously
Competing
for Position

Paywalls

Paywalls
“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)

Paywalls

Paywalls
D = x1 − x1 x2 ρ12
l
1

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Micropayments

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Micropayments ↑ ρ12 ,↓ ρ21

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Subscriptions

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Subscriptions ↓ ρ21

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Limited paywall

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Limited paywall ↑ ρ12

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Subscriptions ↓ ρ21 D <D

l
1
l
2

Paywalls
D = x1 − x1 x2 ρ12
l
1
D2l = x2 − x2 x1ρ21
D s = ( ρ12 + ρ21 )x1 x2
Subscriptions ↓ ρ21 D <D

l
1
l
2
Paywalls may cause a positional disadvantage in advertising markets

One more thing ...

Magnet Content
Single-home on 1
Multi-Home 2 on 2 (2 impressions)
Single-home on 2
Single-home on 1
(2 impressions)
Single-home on 2
(2 impressions) Single-home on 1

Magnet Content
Suppose that Outlet 2 hasSingle-home on 1

Multi-Home 2 on 2limited content (2 impressions)
Single-home on 2
Single-home on 1
(2 impressions)
Single-home on 2

Magnet Content

... and so can only serveSingle-home

Single-home on 1 one on 2
(2 impressions)
period
Single-home on 2
of attention.

Magnet Content
ρ =1


(2 impressions)
period
Single-home on 2
of attention.

D1l = x1 − x1 x2 Magnet Content
ρ =1


(2 impressions)
period
Single-home on 2
of attention.

ρ =1 D2l = 0


(2 impressions)
period
Single-home on 2
of attention.

ρ =1 D2l = 0
D s = x2 (1 + x1 )


(2 impressions)
period
Single-home on 2
of attention.

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
Single-home on 2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2
v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
Single-home on 2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2
v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
Single-home on 2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2
v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
Single-home on 2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2
v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
Single-home on 2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2
v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
Single-home on 2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2
v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
Single-home on 2
v = p2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2 High x2
v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
Single-home on 2
v = p2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2 High x2
v=1 v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
Single-home on 2
v = p2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2 High x2
v=1 v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
Single-home on 2
v = p2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2 High x2
v=1 v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
Single-home on 2
v = p2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2 High x2
v=1 v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
Single-home on 2
v = p2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2 High x2
v=1 v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
v = p2

ρ =1 D2l = 0
D s = x2 (1 + x1 )
Low x2 High x2
v=1 v=1
Single-home on 1
Single-home on 2
Single-home on 1
(2 impressions)
v = p1
v = p2 v = p1

Magnet Content
Profits
0.20
Full content provider
0.15
0.10
Imperfect Tracking
0.05 Limited content provider
0.2 0.4 0.6 0.8 1.0

x2

Magnet Content
Profits
0.20
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2
As limited content provider’s share rises, industry profits rise.

Magnet Content
Profits
0.20
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2
Twice the return to magnet content than full content.

Magnet Content
Profits
0.20
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2
Higher return per reader due to positional advantage.

Magnet Content
Profits
0.20
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2
Evolution away from frequency and towards reach.

Profits
0.20
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2

150 million US accounts
Profits
0.20
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2

95% users visit once every 2 days

Profits
0.20
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2


Profits
10% of 0.20
US site visits
0.15
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2


Profits
10% of 0.20
US site visits
30% of 0.15
US display ads
0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2


Profits
10% of 0.20
US site visits
30% of 0.15
US display ads
Most users provide content

0.10
Imperfect Tracking
0.2 0.4 0.6 0.8 1.0

x2

Conclusions

Conclusions
The efficient operation of advertising markets are dependent

upon consumer behavior.

Conclusions

A combination of consumer switching and imperfect tracking

can explain competitive effects in advertising markets for
news media.

Conclusions


news media.
Tracking technologies may assist in efficiency but adoption

faces impediments.

Conclusions


news media.

faces impediments.
In addition to deterring consumers, paywalls may cause outlets

to have a positional disadvantage in advertising markets.

Conclusions


news media.

faces impediments.
In addition to deterring consumers, paywalls may cause outlets

to have a positional disadvantage in advertising markets.
Incentives to provide content move from full line provision to

magnet but limited content provision.

Future directions

Future directions
Capabilities

Future directions
Capabilities
Information
gathering

Future directions
Capabilities
Information
Fast cycle
gathering

Future directions
Capabilities
Information
Fast cycle
gathering
Filtering

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising Printing &

sales distribution

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy

sales distribution

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy

sales distribution

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales
Can these co-exist in

the one entity?

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales
Can these co-exist in

the one entity?
Established firms
foresaw disruption

Future directions
Capabilities
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales
Necessarily shared assets Can these co-exist in

the one entity?
Established firms
foresaw disruption

Future directions
Capabilities
Limited
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales

the one entity?
Established firms
foresaw disruption

Future directions
Capabilities
Limited 30min
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
Advertising
sales

the one entity?
Established firms
foresaw disruption

Future directions
Capabilities
Limited 30min
Information
Fast cycle
gathering
Reputation
Filtering
for accuracy
OS?
Advertising
sales

the one entity?
Established firms
foresaw disruption

Will the Internet Destroy the News Media?

Will the Internet Destroy the News Media?

Sorting outcome
If capacities not too different, there exists a single market clearing price

Sorting outcome
Single-homer surplus = (Dil + 12 D s )(vi − p)

Sorting outcome
Multi-homer surplus = (D1l + D2l + 43 D s )v − p

Sorting outcome
Multi-homer surplus (2 on i)
0
= v − (2Dil + D lj + 23 D s )p

Sorting outcome
(Dil + 12 D s )(vi − p) = 0
0
= v − (2Dil + D lj + 23 D s )p

Sorting outcome
(Dil + 12 D s )(vi − p) = 0
vi
0
= v − (2Dil + D lj + 23 D s )p

Sorting outcome
(Dil + 12 D s )(vi − p) = 0
p vi
0
= v − (2Dil + D lj + 23 D s )p

Sorting outcome
(Dil + 12 D s )(vi − p) = 0
D lj (v − p) + 14 D s (v − 2 p) > 0
p vi
0
= v − (2Dil + D lj + 23 D s )p

Sorting outcome
(Dil + 12 D s )(vi − p) = 0
v12
D lj (v − p) + 14 D s (v − 2 p) > 0
p vi
0
= v − (2Dil + D lj + 23 D s )p

Sorting outcome
(Dil + 12 D s )(vi − p) = 0
D lj + 12 D s
D lj + 14 D s
p v12 D lj (v − p) + 14 D s (v − 2 p) > 0
p vi
0
= v − (2Dil + D lj + 23 D s )p

Sorting outcome
(Dil + 12 D s )(vi − p) = 0
D lj + 12 D s
D lj + 14 D s
p v12 D lj (v − p) + 14 D s (v − 2 p) > 0
p vi
1
4
D s v > (Dil + 12 D s ) p
0

Sorting outcome
′
v12
(Dil + 12 D s )(vi − p) = 0
D lj + 12 D s
D lj + 14 D s
p v12 D lj (v − p) + 14 D s (v − 2 p) > 0
p vi
1
4
D s v > (Dil + 12 D s ) p
0

Sorting outcome
Dil + 12 D s
p v12′
1
4
Ds (Dil + 12 D s )(vi − p) = 0
D lj + 12 D s
D lj + 14 D s
p v12 D lj (v − p) + 14 D s (v − 2 p) > 0
p vi
1
4
D s v > (Dil + 12 D s ) p
0

Market Clearing
Dil + 12 D s
1
Ds
p v12′
4
D lj + 12 D s
D lj + 14 D s
p v12
p vi

Market Clearing
Dil + 12 D s
1
Ds
p v12′
4
D lj + 12 D s
D lj + 14 D s
p v12
(D l + 12 D s )(v12 − vi )
p vi

Market Clearing
Dil + 12 D s
1
Ds
p v12′
4
(D l + 12 D s )2(v12
′ − v12 )
D lj + 12 D s
D lj + 14 D s
p v12
(D l + 12 D s )(v12 − vi )
p vi

Market Clearing
Dil + 12 D s (D l + 12 D s )3(1 − v12

′)
1
Ds
p v12′
4
(D l + 12 D s )2(v12
′ − v12 )
D lj + 12 D s
D lj + 14 D s
p v12
(D l + 12 D s )(v12 − vi )
p vi

Market Clearing
Dil + 12 D s (D l + 12 D s )3(1 − v12

′)
1
Ds
p v12′
4
(D l + 12 D s )2(v12
′ − v12 )
D lj + 12 D s
D lj + 14 D s
p v12
(D l + 12 D s )(v12 − vi )
p vi
Market Demand for
Impressions
0

Market Clearing
Dil + 12 D s (D l + 12 D s )3(1 − v12

′)
1
Ds
p v12′
4
(D l + 12 D s )2(v12
′ − v12 )
D lj + 12 D s
D lj + 14 D s
p v12
(D l + 12 D s )(v12 − vi )
p vi
Market Demand for Market Supply of
Impressions Impressions
0

Market Clearing
Dil + 12 D s (D l + 12 D s )3(1 − v12

′)
1
Ds
p v12′
4
(D l + 12 D s )2(v12 2a1 D1l + 2a2 D2l

′ − v12 )
D lj + 12 D s
p v12 +(a1 + a2 )D s
D lj + 14 D s
(D l + 12 D s )(v12 − vi )
p vi
0

Market Clearing
Dil + 12 D s
1
Ds
p v12′
4
D lj + 12 D s
p v12 a1 + a2 = 12 (v12 − vi ) + (v12 ' − v12 ) + 23 (1 − v12 ' )
D lj + 14 D s
p vi
0

Market Clearing
′
v12
D s (2 − D s )
v12 p= (3 − 2(a1 + a2 ))
4 + D (2 − D )
s s
vi
0

Will The Internet Destroy The News Media?

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Will the Internet Destroy the

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Newspaper Ad Revenue ($m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue ($m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue ($m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (% of GDP)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m) Daily Circula0on (‘000s)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m) Daily Circula0on (‘000s)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m) Daily Circula0on (‘000s)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Newspaper Ad Revenue (1980 $m)

Source: Newspaper Associa0on of America

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

“Newspaper readers are ‘better’ than Web

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Wednesday, 18 May 2011

... online ads sell at rates that are a fraction of those

Wednesday, 18 May 2011

Wednesday, 18 May 2011

Attention is still scarce ...