Multi-Channel Demand in Two-Sided Markets: Evidence from the Magazines Industry

31 Pages Posted: 15 Feb 2011

Date Written: February 14, 2011

Abstract

Traditionally, magazines have operated in a two-sided market, serving two groups of customers at the same time: readers and advertisers. With the rise of the Internet, further demand channels have been explored: readers can now access much of the contents also on the magazine's website, which in turn has attracted advertisers to these websites.

In this paper, I analyze the interactions between the traditional (offline) demand channels and the new (online) demand channels in the German magazines industry. In particular, I focus on the link between offline and online advertising. I first construct a model in which there is only the offline world and estimate it, using GMM, with data from the time period when there was no Internet reading or advertising. Under the assumption that with the rise of the Internet the estimated coefficients of this nested model do not change, I then estimate the remaining parameters of the full model, in which offline and online advertising and reading coexist.

I find that offline and online advertising are substitutes albeit not perfect ones. In line with previous research, I estimate the network externalities from magazine readers to advertisers and vice versa to be positive: advertisers like readers and readers like advertisements. Additionally, I find the same result for the online market.

Keywords: Two-Sided Markets, Network Effects, Magazines, Internet, Advertising

JEL Classification: L11, L22, L86

Suggested Citation

Hildebrand, Thomas, Multi-Channel Demand in Two-Sided Markets: Evidence from the Magazines Industry (February 14, 2011). Available at SSRN: https://ssrn.com/abstract=1761670 or http://dx.doi.org/10.2139/ssrn.1761670

Thomas Hildebrand (Contact Author)

E.CA Economics ( email )

Schlossplatz 1
Berlin, 10178
Germany

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