Targeted Advertising in Magazine Markets and the Advent of the Internet

This paper examines how the ability of media firms to engage in targeted advertising has changed with increased competition from online channels. We find that the use of the Internet by magazine readers, as well as the availability of companion websites, increase the value of targeted advertising. This indicates a complementarity between offline and online media with respect to targeting. We provide supporting evidence for this result and argue that multi-homing consumers can enhance the value of targeted advertising, in contrast to the usual assumption that multiple advertising messages are redundant. JEL-classification: L11, L82, M37 ¶We thank Jürgen Storp of Initiative Media, a global media and media planning company, for very insightful comments. We also gratefully acknowledge helpful comments received at workshops and seminars held at Copenhagen Business School, the University of British Columbia, the University of Virginia, the City University of New York, the University of Vienna and the annual workshop on Media Economics. We are particularly grateful to Simon Anderson, Joshua Gans, Avi Goldfarb, Daniel Halbheer, José L. Moraga-Gonzalez, Volker Nocke, Martin Peitz, Christian Schultz, Birger Wernerfeldt and Ken Wilbur. ∗University of Toronto, Rotman School of Management, 105 St. George Street, Toronto, ON M5S 3E6, Canada. Email: [email protected]. ∗∗University of Zurich, Dept. of Business Administration, Chair for Entrepreneurship, Plattenstrasse 14, 8012 Zürich; Centre for European Economic Research, Mannheim; Centre for Industrial Economics at the University of Copenhagen; Institute for the Study of Labor, Bonn. Email: [email protected]