Wednesday, February 24, 2010

Internet and Old Media: Substitutes or Complements?

Time spent on the Internet was assumed to crowd out time spent on old media like newspapers and T.V. and to a large extent that's true.

But it can also be a complement, increasing the value of existing media. For instance, the NY Times as an article describing how Twitter and Facebook have helped drive record TV ratings for the Vancouver Olympics.
"The Internet is our friend, not our enemy,” said Leslie Moonves, chief executive of theCBS Corporation, .... “People want to be attached to each other.”
In research that Jeffrey Hu, Duncan Simester and I did, we also found that their could be significant complementarities across different channels, e.g. Internet & catalog sales. In a controlled field experiment, most customers responded to increased catalog mailings by also increasing their purchases via the company's Internet channel. Interestingly, the effect was reversed for the very "best" customers. They were already saturated with information from the company and additional communications actually had a negative effect on profits.

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