The Impact of Consumer Multi-homing on Advertising Markets and Media Competition

Susan Athey, Emilio Calvano () and Joshua Gans

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We develop a model of advertising markets in an environment where consumers may switch (or “multi-home”) across publishers. Consumer switching generates inefficiency in the process of matching advertisers to consumers, because advertisers may not reach some consumers and may impress others too many times. We find that when advertisers are heterogeneous in their valuations for reaching consumers, the switching-induced inefficiency leads lower-value advertisers to advertise on a limited set of publishers, reducing the effective demand for advertising and thus depressing prices. As the share of switching consumers expands (e.g., when consumers adopt the internet for news or increase their use of aggregators), ad prices fall. We demonstrate that increased switching creates an incentive for publishers to invest in quality as well as extend the number of unique users, because larger publishers are favored by advertisers seeking broader “reach” (more unique users) while avoiding inefficient duplication.

Keywords: advertising; media; newspapers; matching; switching; multi-homing; single-homing; tracking; two-sided markets; platforms. (search for similar items in EconPapers)
JEL-codes: L11 L82 (search for similar items in EconPapers)
Date: 2014-10-28, Revised 2016-04-27
New Economics Papers: this item is included in nep-com, nep-cul, nep-ict, nep-mic, nep-mkt and nep-net
Note: This paper was previously circulated with the title “Will the Internet Destroy the News Media?” and “The Impact of the Internet on Advertising Markets for News Media.”
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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Related works:
Working Paper: The Impact of Consumer Multi-homing on Advertising Markets and Media Competition (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:379

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