The Hidden Dynamics of Print–Online Competition in Classified Advertising Markets

Abstract

Classified advertisements are an important revenue source for newspaper publishers and they constitute a large share of non‐editorial content, highly valued by readers. By matching supply and demand in the corresponding markets for goods and services, publishers of classified advertisements serve as information brokers increasing transparency and driving market clearance. These days specific online services for each category of classified advertisements promise a far more efficient matching mechanism at a lower price and compete with the incumbent print players. In this article we present an empirical analysis of classified advertisements in the categories of recruitment, real estate and automotive, based on data from Germany. The substitution dynamics hidden by fluctuating overall market developments are derived from a simultaneous fit of the market dependence of advertising space in newspapers and a time‐dependent substitution term. The results show that approximately half of the classified print advertisements have already migrated to online players. However, this substitution seems to have reached at least a temporary saturation. Apparently, the so‐called Riepl's ‘law’, formulated at the beginning of the twentieth century, still holds true today. This ‘law’ states that once a specific technical medium has established itself in social practices it will exhibit a strong resistance to change.

Keywords:

• classified advertising
• newspaper publishing
• electronic markets
• diffusion of innovations
• substitution effects