Journal Article

Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers

Zhu, Feng, Seamans, Robert

2014

Overview

How do firms respond to entry in multi-sided markets? We address this question by studying the impact of Craigslist, a website providing classified-advertising services, on local U.S. newspapers. We exploit temporal and geographical variation in Craigslist's entry to show that newspapers with greater reliance on classified-ad revenue experience a larger drop in classified-ad rates after Craigslist's entry. The impact of Craigslist's entry on the classified-ad side appears to propagate to other sides of the newspapers' market. On the subscriber side, these newspapers experience an increase in subscription prices, a decrease in circulation, and an increase in differentiation from each other. On the display-ad side, affected newspapers experience a decrease in display-ad rates. We also find evidence that affected newspapers are less likely to make their content available online. Finally, we estimate that Craigslist's entry leads to $5.0 billion (year 2000 dollars) in savings to classified-ad buyers during 2000-2007. This paper was accepted by Sandra Slaughter, information systems.

• Publisher: INFORMS,Institute for Operations Research and the Management Sciences
• Subject: Advertisements / Advertisers / Advertising / Advertising media / Advertising rates / Advertising revenue / Business models / Classified advertising / Corporate strategies / Craigslist / Differentiation / entry responses / Estimation / Experience / Internet / Local media / Management science / Market entry / Market prices / Marketing / Markets / Methods / Millennium / multi-sided markets / Newspaper industry / Newspaper publishing / Press / Prices / Print advertising / Research design / Revenue / Search engines / Smartphones / Studies / Subscription prices / U.S.A / Web sites / Websites