Florian Stahl @ March 24, 2013 3:26 pm

Information in Digital, Economic, and Social Networks

Arun Sundararajan, Foster Provost, Gal Oestreicher-Singer and Sinan Aral provides an comprehensive summary of research focusing on “information in networks”—its distribution, its diffusion, its inferential value, and its influence on social and economic outcomes. This summary will be published soon in the journal Information System Research

Information in Digital, Economic, and Social Networks


Digital technologies have made networks ubiquitous. A growing body of research is examining these networks to gain a better understanding of how firms interact with their consumers, how people interact with each other, and how current and future digital artifacts will continue to alter business and society. The increasing availability of massive networked data has led to several streams of inquiry across fields as diverse as computer science, economics, information systems, marketing, physics, and sociology. Each of these research streams asks questions that at their core involve “information in networks”—its distribution, its diffusion, its inferential value, and its influence on social and economic outcomes. We suggest a broad direction for research into social and economic networks. Our analysis describes four kinds of investigation that seem most promising. The first studies how information technologies create and reveal networks whose connections represent social and economic relationships. The second examines the content that flows through networks and its economic, social, and organizational implications. A third develops theories and methods to understand and utilize the rich predictive information contained in networked data. A final area of inquiry focuses on network dynamics and how information technology affects network evolution. We conclude by discussing several important cross-cutting issues with implications for all four research streams, which must be addressed if the ensuing research is to be both rigorous and relevant. We also describe how these directions of inquiry are interconnected: results and ideas will pollinate across them, leading to a new cumulative research tradition.

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Florian Stahl @ December 19, 2011 7:19 am

Pricing Models for Online Advertising: CPM vs. CPC

Weblog Category: Business Strategy,Pricing

New Article about pricing of online advertsing in Information Systems Research:

Pricing Models for Online Advertising: CPM vs. CPC

By  Asdemir Kursad, Nanda Kumar and S. Jacob Varghese

Online advertising has transformed the advertising industry with its measurability and accountability. Online software and services supported by online advertising is becoming a reality as evidenced by the success of Google and its initiatives. Therefore, the choice of a pricing model for advertising becomes a critical issue for these firms. We present a formal model of pricing models in online advertising using the principal–agent framework to study the two most popular pricing models: input-based cost per thousand impressions (CPM) and performance-based cost per click-through (CPC). We identify four important factors that affect the preference of CPM to the CPC model, and vice versa. In particular, we highlight the interplay between uncertainty in the decision environment, value of advertising, cost of mistargeting advertisements, and alignment of incentives. These factors shed light on the preferred online-advertising pricing model for publishers and advertisers under different market conditions.

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Florian Stahl @ November 14, 2011 2:11 pm

Digital Media Buzz | The Paywall Debate: A Historical Perspective

Weblog Category: Business Strategy,Pricing

I found an very interesting article by Sheila Shayon about the offering of paid news content. This article was originally published on February 23, 2010 in Digital Media Buzz which is unfortately no longer online.

The Paywall Debate: A Historical Perspective

By Sheila Shayon

The New York Times Company recently announced a paid, metered model for  the beginning of 2011. Users will have free access to an – as yet – unspecified number of articles per month, and then be charged when usage exceeds that number.

What they’re looking for – like all Web publishers, is additional revenue streams. The company says this will provide the “necessary flexibility to keep an appropriate ratio between free and paid content and stay connected to a search-driven Web.”

“Our new business model is designed to provide additional support for The New York Times‘ extraordinary, professional journalism,” says Arthur Sulzberger, Jr., chairman of The New York Times Company and publisher of The New York Times. “Our audiences are very loyal and we believe that our readers will pay for our award-winning digital content and services.”

News Corp, the largest and loudest proponent of ‘pay-to-play’ online content, has also begun rolling out pay walls for its online news. “We’ll be charging for online wherever we have publications,” says chairman and CEO, Rupert Murdoch. “Consumers are willing to pay to be entertained and informed.”

And therein lies the problem.  According to Joseph Turow, professor of Communication at the University of Pennsylvania’s Annenberg School for Communication, “The media history of the 20th century has been teaching people that content is cheap. It goes as far back as the late 19th century, when The Ladies Home Journal and Saturday Evening Post exhorted readers to buy what their advertisers were selling, because they support your magazine. There has always been the intrusion of advertisers – you, the consumer, don’t have to pay for anything because it’s all ad-supported. But – this does not work on the Web.”

Media history is a series of outmoded distribution and economic models being ported from one technology to another – without requisite reinvention or evolution: newspapers and radio to TV and now the Internet. The basic equation of distribution, access and revenue – has not yet been adjusted for the Web.

A bit of historical perspective is helpful in understanding the axial moment we’ve arrived at today regarding a fundamental shift in the delivery and economics of mass media. It was the advertising industry, in the 1920s, which first coined the term medium as a backdrop to placing ads across different media, which were previously known as publications.

In the early 1960s, Marshall McLuhan coined the term global village. It described the end of an individualistic, visual, print culture due to emerging electronic media, which would move society from individualism and fragmentation to a collective identity, and a “tribal base.” These comments, made in the 1960s, of a global village, interconnected by an electronic nervous system pre-dated the Internet but stamped the concept into the DNA of popular culture 30 years before it actually happened.

Digitally defined pay walls have been compared to the Internet equivalent of the Berlin Wall. Professional journalists fear the disintermediation wrought by the Web, especially the burgeoning forms of social media such as blogging, and massive content factories employing amateur experts for meager wages.

Simultaneously, it’s a fact that bloggers and crowdsourcing are uncovering news otherwise not covered. Traditional journalists writing behind pay walls are prevented from building their own personal brands, while un-credentialed and unskilled writers can rise to the top of their peer heap in meritocratic online communities.

The explosion of social media bloggers underscores the fact that the online experience is not just about the content.  It is about the relationship. Pay walls limit a news organization’s relationship with its customers – the public.

Pay wall proponents are exponents of news organizations no longer providing free content at point of delivery. The underlying theory is that this will augment the value of news content by reinstating rules of scarcity and habituating a new generation to paying for news.

The pay wall protestors affirm a fundamental lack of understanding of the information abundance era — a misguided effort to sustain a 20th century ethos of intermediated media. Charging for content depends on an entitlement environment, an antiquated business model built on scarcity and publishers who control the food chain.

Charging is replete with its own lack of profitability: increased marketing expenses; smaller audience; less ad revenue; fewer clicks and links. The new linked economy, leveraging networks and specialization efficiencies born of Web usage, demands collaboration.

The following timeline takes a historical point of view on major metrics for when the media of newspaper, radio, television and Internet reached mass (for the time) distribution, and how and when audiences began to pay for content. The incubation period ranges from 1615 years for newspapers; 21 years for radio and 14 for TV. The Internet still hasn’t been able to prove a pay model for its content, but e-commerce agent, Amazon, did post a profit in 2002.


A Historical Perspective

The entire content industry is in upheaval. Transformative technology, free public classified sites like Craigslist, the impact of the economy on advertising and fundamental changes in consumer habits, add up to new rules and shifting business models.

“We are now in the midst of an epochal debate over the value of content, and it is clear to many newspapers that the current model is malfunctioning,” Newscorp’s Murdoch says.

One thought is that e-readers may ’save the goose,’ holding the line for charging at the handheld device portal.

“It’s a continual process of advertisers taking over and supporting media, and a continuing dilemma: denying the right of professionals to be paid for what they do. People go to The Huffington Post and feel they’ve read the NY Times. The propositions that worked historically for radio and TV were ported to the Internet and they just don’t work there,” Turow says.


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Florian Stahl @ September 11, 2011 3:24 pm

Optimal Software Free Trial Strategy: The Impact of Network Externalities and Consumer Uncertainty

A paper related to optimal sampling strategies of information goods will appear soon in the journal Information System Research

Optimal Software Free Trial Strategy: The Impact of Network Externalities and Consumer Uncertainty

By Hsing Kenneth Cheng and Yipeng Liu

Many software firms offer a fully functional version of their products free of charge, for a limited trial period, to ease consumers’ uncertainty about the functionalities of their products and to help the diffusion of their new software. This paper examines the trade-off between the effects of reduced uncertainty and demand cannibalization, uncovers the condition under which software firms should introduce the time-locked free trial software, and finds the optimal free trial time. As software firms have the option of providing free trial software with full functionalities but a limited trial time or limited functionalities for an unlimited trial time, we develop a unified framework to provide useful guidelines for deciding which free trial strategy is preferred in the presence of network externalities and consumer uncertainty.

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