Is Online Newspaper Advertising Cannibalizing Print Advertising?

48 Pages Posted: 22 May 2013 Last revised: 19 Jun 2014

Shrihari Sridhar

Pennsylvania State University - Smeal College of Business

S. Sriram

The Stephen M. Ross School of Business at the University of Michigan

Date Written: December 2013

Abstract

During the past decade, the newspaper industry experienced significant erosion of revenues, predominantly in print advertising. Between 2006 and 2010, the industry lost approximately 51% in print advertising revenues. The concomitant increase in the less rewarding online advertising has been unable to make up for this loss. As a result, in 2010, for every $1 increase in online advertising, newspapers lost $7 in print advertising. A prevalent concern is that online newspaper advertising is cannibalizing the more lucrative print advertising. We investigate the veracity of this claim by studying how firms reallocate their media budgets over time between the online and print media within the newspaper as well as other media options outside the newspaper. We perform our empirical analysis using unique panel data on account-level advertising expenditures in a Top 50 US newspaper during a 60-month period from January 2007 through December 2011. We find that advertisers view print and online advertising within the same newspaper as substitutes. However, across a wide range of specifications, only 4-9% of the decline in print advertising can be traced back to the growing attractiveness of the online newspaper. Thus, concerns in the industry that newspapers’ websites are responsible for the decline in print advertising may not be valid. Most of the decline in print advertising revenues is due to the growth in attractiveness of outside media options. Based on these results, we infer the monetary impact that the growing attractiveness of online newspaper advertising has had on the overall newspaper ad revenues. We discuss the implications of these findings for the newspaper industry.

Keywords: print advertising, online advertising, newspapers, substitution effects

JEL Classification: C33, C34, C51, M31

Suggested Citation

Sridhar, Shrihari and Sriram, S., Is Online Newspaper Advertising Cannibalizing Print Advertising? (December 2013). Available at SSRN: https://ssrn.com/abstract=2268112 or http://dx.doi.org/10.2139/ssrn.2268112

Shrihari Sridhar

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

S. Sriram (Contact Author)

The Stephen M. Ross School of Business at the University of Michigan ( email )

Ann Arbor, MI 48109
United States

Paper statistics

Downloads
299
Rank
82,164
Abstract Views
1,300