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

37 Pages Posted: 27 Nov 2012 Last revised: 15 Oct 2016

See all articles by Susan Athey

Susan Athey

Stanford Graduate School of Business

Emilio Calvano

CSEF - Center for Studies in Economics and Finance

Joshua S. Gans

University of Toronto - Rotman School of Management; NBER

Date Written: October 14, 2016

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, tracking, two-sided markets, platforms

JEL Classification: L11, L82

Suggested Citation

Carleton Athey, Susan and Calvano, Emilio and Gans, Joshua S., The Impact of Consumer Multi-Homing on Advertising Markets and Media Competition (October 14, 2016). Rotman School of Management Working Paper No. 2180851. Available at SSRN: https://ssrn.com/abstract=2180851 or http://dx.doi.org/10.2139/ssrn.2180851

Susan Carleton Athey

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Emilio Calvano

CSEF - Center for Studies in Economics and Finance ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Joshua S. Gans (Contact Author)

University of Toronto - Rotman School of Management ( email )

Canada

HOME PAGE: http://www.joshuagans.com

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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