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Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers

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  • Robert Seamans

    (Stern School of Business, New York University, New York, New York 10012)

  • Feng Zhu

    (Harvard Business School, Harvard University, Boston, Massachusetts 02163)

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. This paper was accepted by Sandra Slaughter, information systems.

Suggested Citation

  • Robert Seamans & Feng Zhu, 2014. "Responses to Entry in Multi-Sided Markets: The Impact of Craigslist on Local Newspapers," Management Science, INFORMS, vol. 60(2), pages 476-493, February.
    • Handle: RePEc:inm:ormnsc:v:60:y:2014:i:2:p:476-493
    DOI: 10.1287/mnsc.2013.1785
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