Strategies to fight ad-sponsored rivals
By: Ramon Casadesus-Masanell, Feng Zhu
Contributors: Zhu, Feng; Harvard Business School
Edition: Rev. ed.
Series: Working paper / Harvard Business School -- 10-026; Working paper (Harvard Business School) -- 10-026.
Publisher: Harvard Business School
Published: 2009
Place of publication: [Boston]
Language: eng
Number of pages: 31
Description: We analyze the optimal strategy of a high-quality incumbent that faces a low-quality ad-sponsored competitor. In addition to competing through adjustments of tactical variables such as price or the number of ads a product carries, we allow the incumbent to consider changes in its business model. We consider four alternative business models, a subscription-based model, an ad-sponsored model, a mixed model in which the incumbent offers a product that is both subscription-based and ad-sponsored, and a dual model in which the incumbent offers two products, one based on the ad-sponsored model and the other based on the mixed business model. We show that the optimal response to an ad-sponsored rival often entails business model reconfigurations. We also find that when there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through the subscription-based or the ad-sponsored model, rather than the mixed or the dual model, because of cannibalization and endogenous vertical differentiation concerns. We discuss how our study helps improve our understanding of notions of strategy, business model, and tactics in the field of strategy.
Notes: "September 2009, revised March 2010"--Publisher's website.

"February 13, 2010"--added t.p.

Includes bibliographical references.