Catching Exclusive Eyeballs: Multi-Homing and Platform Competition in the Magazine Industry

Media platforms compete for both consumers and advertisers, especially when consumers divide their attention among multiple platforms. In this dissertation, I study how media competition affects media advertising volume and revenues. In particular, I investigate how consumer multiple purchasing behavior (or “multi-homing”) shapes competition in two-sided media markets. Standard models of two-sided markets have often been based on the assumption that consumers limit their attention to a single platform (or “single-homing”). As applied to media markets, it implies that media platforms have a monopoly position over the consumer impression. While insightful, this approach has been challenged by many empirical puzzles. This dissertation joins a nascent theoretical literature (e.g., Ambrus, Calvano, and, Reisinger (2016); Anderson, Foros, and, Kind (2016)) to incorporate consumer multi-homing into an empirical model of two-sided magazine markets.
Specifically, I build and estimate a structural model of consumer demand for multiple magazines, advertiser demand and magazines’ two-sided pricing decisions. I compile a novel data-set of detailed MSA-level magazine sales, advertising quantities and prices, and consumers’ state order of preference of major U.S. magazines in six genres from 2003 to 2012. I use the Method of Simulated Moments (MSM) to estimate the model, quantifying the cross-group externalities in magazine markets. On the reader side, I find that consumer ad nuisance cost is approximately 5 cents per ad page, in contrast to the ad-neutrality or ad-loving findings in the literature on print media. On the advertiser side, I estimate that, on average, advertisers value exclusive eyeballs at 12 cents each, or more than twice the value of a shared consumer. This is the first direct evidence that media ad prices reflect advertisers’ differential valuation of exclusive and shared consumers on platforms, supporting the hypothesis in the theoretical literature. In a counter-factual exercise, I illustrate how multi-homing consumers affect market outcomes as the market environment for print media has worsened over the decade. I investigate how the market outcomes would have changed if demand for magazines in 2012 remained as strong as in 2003. I interpret the results as the effects of the Internet on magazine markets. Subscription levels would increase by 9 percent on average despite higher subscription prices. Exclusive readerships would increase by 22 percent, which translates to stronger advertising demand and a 37-percent increase in ad revenues. The internet has large impacts on magazine ad markets by reducing the number of consumers and also by changing the consumer composition on platforms.