New Harvard Study: Strategies to Fight Ad-Sponsored Models

Will the news industry's obession with charging for content work?  Maybe, maybe not, according to a new study by Ramon Casadesus-Masanell of Harvard Business School and Feng Zhu of USC's Marshall School of Business. The study examines the business models of over twenty companies divided into four categories: pure fee-based models like iTunes; pure ad-sponsored models like Facebook; mixed models like WSJ.com; and tiered content models such as Match.com.

The study finds that once a free, ad-based competitor enters a market, rivals offering mixed strategies loose their relevance. The best strategy is to commit to one monetization method: ad-sponsored or fee-sponsored business model. "When there is an ad-sponsored entrant, the incumbent is more likely to prefer to compete through a pure, rather than a mixed, business model because of cannibalization and endogenous vertical differentiation concerns," according to the study.