Abstract: Motivated by the emergence of online content aggregators such as Google News, as a prominent source of web traffic for content publishers, this paper examines the impact of introducing a content aggregator platform on market equilibrium and welfare under two different content publishers' business models: free content with advertisements and subscription-based content with advertisements. A crucial feature of our framework is competition between content publishers and aggregator platforms in the advertising market. Using a game-theoretic model, our analysis yields interesting insights. First, we find that platform introduction is Pareto optimal when publishers charge subscription prices to the users. However, when content is free, publishers' profits strictly decrease, while both users and advertisers benefit. This finding contrasts with the general regulatory presumption that content aggregators make publishers worse off. Next, in the presence of an aggregator platform, we find that publishers display fewer advertisements under the subscription-based model for weak content differentiation and sufficiently large platform quality or strong content differentiation. Finally, we provide implications for social welfare.

Authors’ Names: Gaurav Jakhu, Tarun Jain

Journal Name: Naval Research Logistics