The Impact of Advertising Spending On Media Coverage

Newspaper markets are primary examples of so-called two-sided markets. Newspaper publishers sell content to readers and eyeballs to advertisers. Typically readers are subsidized in that they are charged a cover price below marginal costs and the largest part of publishers’ revenues is collected from the advertisers’ side. Since demand for advertisers’ products is not only influenced by the amount of advertising but also by media coverage and recommendations in newspapers, an important question that arises is whether newspapers are neutral in their editorial choices. It could well be that advertisers are pressuring newspapers to increase media coverage of the advertiser in return to higher advertising expenditures. We empirically investigate this hypothesis in the Belgian newspaper market. To this end we collected a dataset about the monthly advertising spending of the largest advertisers in each single newspaper. The dataset was matched with information about media coverage of these advertisers in the respective newspapers, which allows us to test whether advertising spending and coverage are related.