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

34 Pages Posted: 24 Oct 2010 Last revised: 7 Sep 2014

Robert Seamans

New York University (NYU) - Leonard N. Stern School of Business

Feng Zhu

Harvard University - Harvard Business School

Date Written: May 28, 2013

Abstract

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 US 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 in year 2000 dollars in savings to classified-ad buyers during 2000-2007.

Keywords: entry, pricing, platforms, two-sided markets

JEL Classification: L13, L86, O33

Suggested Citation

Seamans, Robert and Zhu, Feng, Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers (May 28, 2013). NET Institute Working Paper No. 10-11. Available at SSRN: https://ssrn.com/abstract=1694622 or http://dx.doi.org/10.2139/ssrn.1694622

Robert Seamans (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

Feng Zhu

Harvard University - Harvard Business School ( email )

Soldiers Field Road
Morgan 431
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=14938

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