DP7729 Platform Siphoning: Ad-Avoidance and Media Content

Author(s): Simon P Anderson, Joshua Gans
Publication Date: March 2010
Keyword(s): ad-avoidance, advertising, bypass, death spiral, media economics, siphoning, Two-sided markets
JEL(s): L82, L86, M37
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=7729

Content providers rely on advertisers to pay for content. TiVo, remote controls, and pop-up ad blockers are examples of ad-avoidance technologies that allow consumers to view content without ads, and thereby siphon off the content without paying the ‘price.’ We examine the content provider’s reaction to such technologies, demonstrating that their adoption increases advertising clutter (leading to a potential downward spiral), may reduce total welfare and content quality, and can lead to more mass-market content. We cast doubt on the profitability of using subscriptions to counter the impact of ad-avoidance.