Responses to entry in multi-sided markets: The impact of craigslist on local newspapers

Robert Seamans, Feng Zhu

    Research output: Contribution to journalArticle

    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 U.S. 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 (year 2000 dollars) in savings to classified-ad buyers during 2000-2007.

    Original languageEnglish (US)
    Pages (from-to)476-493
    Number of pages18
    JournalManagement Science
    Volume60
    Issue number2
    DOIs
    StatePublished - Feb 2014

    Keywords

    • Craigslist
    • Entry responses
    • Multi-sided markets
    • Newspaper industry

    ASJC Scopus subject areas

    • Strategy and Management
    • Management Science and Operations Research

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