Presentation on theme: "Discussion of Targeted Advertising: The Role of Subcriber Characteristics in Media Markets by Ambarish Chandra Lapo Filistrucchi University of Siena &"— Presentation transcript:
Discussion of Targeted Advertising: The Role of Subcriber Characteristics in Media Markets by Ambarish Chandra Lapo Filistrucchi University of Siena & Tilburg University 5° Media Workshop, Bologna, October 2007
The paper Nice to read Very good example of how logic can overcome lack of data (no data on ad quantities, no demographics of newspaper readers) Most important contribution: Model of Advertiser Choice among Newspapers -> Micro-founded demand of advertising
The paper Fact: As n increases, cover prices go down and ad rates go up Explanation: Targeted advertising is more valuable Targeting on homogeneous groups by demographics and distance Mechanism: Markets with more newspapers have greater segmentation Greater segmentation means more homogeneous subscribers Newspapers with more homogeneous subscribers charge higher prices
Discussion The literature Two critical assumptions: - Newspapers are monopolists on advertising market - Readers are not affected by advertising Alternative explanation
The literature Journal of Media Economics 2000, Vol. 13, No. 4, Pages Who Wants You When You're Old and Poor? Exploring the Economics of Media Pricing Martin A. Koschat Time Warner, Inc. William P. Putsis, Jr. London Business School This article explores the underlying causes and implications of the relationship between the demographics of a magazine's readership base and its advertising rates. The analysis generates three central insights. First, not unexpectedly, magazines with a disproportionate fraction of readers who are young or affluent or both command a significant premium over other magazines of comparable size. Second, the magnitude of the premium paid for magazines with a disproportionate fraction of young or affluent or both readers is so large that it cannot solely be explained by standard economic explanations of media valuation. Third, if the size and demographic composition of a magazine's readership has a significant impact on a magazine's revenue stream, then there is an economic incentive to skew editorial content to readers that are more "valuable" to advertisers. This article provides some empirical evidence of the strength of these influences.
The literature Also: Martin A. Koschat, William P. Putsis. (2002) Audience Characteristics and Bundling: A Hedonic Analysis of Magazine Advertising Rates. Journal of Marketing Research 39:2, 262 Martin A. KoschatWilliam P. Putsis Argentesi & Filistrucchi (2006) Van Cayseele & Vanormelingen (2007)
Some data Tab. 1 -Use of media (val. %) N. of media% sulla popolazione 19, , , ,8 8+2,3 100,0Totale
Asymmetry in mkt definition A media might be a substitute for advertisers, but not for consumers
Tab. 7 –Le opinioni sulla pubblicità nei media (val. %) TVRadioDailyMagaz ine Interne t All Invasive47,243,136,037,142,540,2 Some data
Total<25 years WomenLess edu Change channel on Radio32,753,430,421,2 Change channel on TV70,478,364,954,2
A two-sided model Armstrong (2006)
If positive externality, lower markup on readers -> higher markup on advertising –>overestimation If negative externality, lower markup on readers -> lower markup on advertising-> underestimation
Alternative explanations Markets with more newspapers have greater segmentation Greater segmentation means more homogeneous subscribers Newspapers with more homogeneous subscribers charge higher prices Ownership?