New Research Looks at Craigslist’s Damaging Blow to Local Newspapers
PRESS RELEASE: NYU Stern Professor Robert Seamans draws lessons for media industry on how to handle future shocks
In a new study, Robert Seamans, assistant professor of management and organizations at the NYU Stern School of Business, and Feng Zhu at Harvard Business School, examine the impact of Craigslist, a website providing classified-advertising services, on local US newspapers during the 2000s. They estimate that classified-ad buyers saved $5 billion from 2000-2007 as a result of Craigslist entering the market. On the flip-side, local newspapers lost out on billions in potential revenue as readers who historically posted their classified ads in the paper opted to post their ads on Craigslist.
The researchers also identified several ripple effects across the newspaper industry. They calculated that newspapers relying heavily on classified-ad revenue (i.e., papers with classified-ad managers) saw a:
- 20.7% drop in classified-ad rates
- 3.3% increase in subscription prices
- 4.4% decrease in circulation
- 16.5% increase in differentiation from other papers
- 3.1% decrease in display-ad rates
- Lower likelihood of providing content online
“Our study demonstrates how media companies respond to shocks from technologically disruptive entrants in different industries – an important issue as the boundaries between media industries are blurred and advertisers are able to reach relevant consumers through a variety of platforms such as TV, the Internet and mobile devices,” explains Professor Seamans. “This study provides some insights to media moguls who will face future industry shocks and are pushed to re-evaluate their business models.”
The paper, titled “Responses to Entry in Multi-sided Markets: The Impact of Craigslist on Local Newspapers,” is forthcoming in Management Science.