Market segmentation and information development costs in a two-tiered fee-based and sponsored-based web site

Riggins, Frederick J.

doi:10.1109/hicss.2002.994259

Cited by 3 publications

(6 citation statements)

References 13 publications

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“…Several scholars (e.g., Bourreau 2003, Dukes 2004, Dukes and Gal-Or 2003, Masson et al 1990, Nilssen and Sørgard 2001, Peitz and Valletti 2008, Spence and Owen 1977 have studied the ad-sponsored model in reference to TV commercials. Further, Riggins (2002) studied the case in which a monopolist offers an ad-sponsored website to both high-and low-type consumers and a fee-based portion to high-type consumers only. Gabszewicz et al (2006) found that advertisements may increase or decrease the product price depending on the customers' attitude towards advertisements.…”

Section: Ad-sponsored Business Modelmentioning

confidence: 99%

Optimal Pricing Model of Digital Music: Subscription, Ownership or Mixed?

Li¹,

Luo

Qiu

et al. 2020

Production and Operations Management

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Traditionally, consumers purchase physical music (often in the form of CDs or cassettes) from local retailers. With the development of Internet technology, the market share of digital music has grown rapidly in recent years. Unlike physical music, digital music is provided by several emerging digital music providers through the Internet to consumers. Pricing models of digital music are also drastically different from those of physical music. In this study, we identify three common schemes for selling digital music: ownership, subscription and mixed pricing models. Under the ownership model, consumers purchase and download their preferred songs and enjoy music using their local devices. Under the subscription model, music is provided through an online streaming service. The mixed pricing model is a combination of the previous two. Our paper explores and compares the three pricing models. Through a stylized model, we find that several factors, including the advertisement revenue rate and consumers’ reservation value for the music service, have crucial effects on the comparison of the three pricing models.

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Section: Ad-sponsored Business Modelmentioning

confidence: 99%

Optimal Pricing Model of Digital Music: Subscription, Ownership or Mixed?

Li¹,

Luo

Qiu

et al. 2020

Production and Operations Management

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“…The above research tends to see content and advertising as a whole and bases versioning on the ad volume alone, whereas, in practice, platforms tend to base versioning on the content quality and the ad volume, which receives scant academic attention. For example, Riggins (2002) studied an information Web site's choice of the content quality and price level for a fee‐based site and the degraded quality level for a sponsored site and showed that a reduction in the potential for advertising revenues results in lower content quality on the free site but permits the seller to raise the fee charged to high‐type consumers. Halbheer et al (2014) developed an analytical framework to study sampling strategies (lower‐end version with advertisements is offered for free and consumers need to pay for access to the higher‐end version) for online publishers of information goods.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Other scholars also take the quality difference into consideration when studying the vertical differentiation strategy in two‐sided markets, such as Riggins (2002), Halbheer et al (2014), and Wang et al (2021). However, all of them assumed that there is a free lower‐quality product with advertisements and seldom considered how to price advertising.…”

Section: Introductionmentioning

confidence: 99%

Fee or subsidy? Pricing strategies for digital content platforms with different content and advertising

Mei

Wang

2023

Manage Decis Econ

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The practice of offering basic and premium services with different content and advertising on digital content platforms has gained popularity. The challenge of balancing subscription fees and advertising fees to maximize revenue has led some platforms to charge consumers for the basic service, while others subsidize it. Therefore, this study aims to examine whether consumers should be charged or subsidized for the basic service, which includes lower‐quality content and advertisements. By utilizing an optimization model, we discover that when there is a significant surplus of advertising or a slight surplus of advertising with a minimal profit to advertisers, the platform should charge. However, when the surplus of advertising is low and the profit to advertisers is high, the platform should subsidize. Furthermore, under partial market coverage, when the surplus of advertising is low and the profit to advertisers is moderate, the platform should initially charge and then subsidize as the content quality difference increases. Surprisingly, the intuition that the pricing of the basic service and advertising should decrease with the nuisance of advertising and increase with the surplus of advertising may not always hold true. This study led to a novel approach to exploring differentiated pricing for digital content platforms, taking into account the advertising information value from a bilateral market perspective.

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“…Viewers have to view ads that come in order to access the free product. To mirror the properties of pricing and advertising strategies, let the cost of setting ads be zero [7], and the producing cost of content is negligible on Internet.…”

Section: The Modelmentioning

confidence: 99%

“…With significant increasing number of the Internet users, the pricing and advertising models have attracted attention of many researchers. Riggins [7] develops a separating equilibrium model for fee-based and ads sponsored-based websites and examines a monopolist's choice of web content price and quality. In another study, Prasad et al [8] suggest different optimal strategies for content firms depending on the context: pure pay-per-view strategy for high income users, who are willing to pay the advertising avoidance fee, and free strategy based on advertisement for high advertising sales with low-quality content.…”

Section: Introductionmentioning

confidence: 99%

Two-Stage Dynamic Pricing and Advertising Strategies for Online Video Services

Tan

2017

Discrete Dynamics in Nature and Society

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As the demands for online video services increase intensively, the selection of business models has drawn the great attention of online providers. Among them, pay-per-view mode and advertising mode are two important resource modes, where the reasonable fee charge and suitable volume of ads need to be determined. This paper establishes an analytical framework studying the optimal dynamic pricing and advertising strategies for online providers; it shows how the strategies are influenced by the videos available time and the viewers' emotional factor. We create the two-stage strategy of revenue models involving a single fee mode and a mixed fee-free mode and find out the optimal fee charge and advertising level of online video services. According to the results, the optimal video price and ads volume dynamically vary over time. The viewer's aversion level to advertising has direct effects on both the volume of ads and the number of viewers who have selected low-quality content. The optimal volume of ads decreases with the increase of ads-aversion coefficient, while increasing as the quality of videos increases. The results also indicate that, in the long run, a pure fee mode or free mode is the optimal strategy for online providers.

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Market segmentation and information development costs in a two-tiered fee-based and sponsored-based web site

Cited by 3 publications

References 13 publications

Optimal Pricing Model of Digital Music: Subscription, Ownership or Mixed?

Optimal Pricing Model of Digital Music: Subscription, Ownership or Mixed?

Fee or subsidy? Pricing strategies for digital content platforms with different content and advertising

Two-Stage Dynamic Pricing and Advertising Strategies for Online Video Services

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