Competition and Platform Positioning*

Robert Seamans Feng Zhu

Stern School of Business Marshall School of Business
New York University University of Southern California
rseamans@stern.nyu.edu fzhu@marshall.usc.edu

July 18, 2012

____________________________
*
Mikayla Terrell provided excellent research assistance. We thank Kevin Boudreau, J.P. Eggers, Anindya Ghose,
Tim Simcoe, Richard Wang, seminar participants at Boston University, Imperial College London, London Business
School, New York University, UC Irvine, University of Michigan, and conference participants at the 2011 NYU
Stern Economics of Strategy Conference and the 2011 Institutions & Innovations Conference for valuable feedback.
 Competition and Platform Positioning

Abstract

We examine how platforms in multi-sided markets adjust their positions in response to

increased competition, using data from the US newspaper industry. We take advantage of
geographical and temporal variation in entry by Craigslist, a website providing classified-
ad services, and show that newspapers respond to Craigslists entry into the classified-ad
side of their market by increasing content differentiation among themselves on the
subscriber side of the market. This effect is particularly pronounced in markets that
feature readers with heterogeneous tastes in news types.

1
1. Introduction
Many markets are multi-sided, meaning that two or more parties, such as advertisers and consumers,
conduct transactions through an intermediary or a platform (e.g., Rochet and Tirole 2003, Parker and Van
Alstyne 2005, Armstrong 2006, Boudreau 2010). For example, a video-game console, such as Microsofts
Xbox or Sonys PlayStation, serves as a platform connecting game developers to game players. Other
examples include operating systems (computer users and application developers), online auction markets
(buyers and sellers), shopping malls (shoppers and stores), credit cards (card holders and merchants),
search engines (web surfers and advertisers), and media industries such as newspapers and television
networks (content consumers and advertisers). Such markets comprise a large and rapidly growing share
of today's economy. Eisenmann (2007) estimates that 60 percent of the worlds 100 largest corporations,
ranked by market value, earn at least half of their revenue from multi-sided markets.
Multi-sided markets have unique features that differ from those of one-sided markets, suggesting
the need for additional theoretical and empirical examination of competitive dynamics in these markets
(e.g., Wright 2004). Recent theoretical work, for example, shows that in ad-sponsored media industries,
when competition reduces revenues on the advertiser side, platforms (i.e., newspapers, television stations,
or radio stations) will differentiate further from each other on the subscriber side in an attempt to capture
more value from subscribers (e.g., Gabszewicz Laussel and Sonnac 2001, 2006, Peitz and Valletti 2008).
Theoretical predictions on platforms positioning strategies, however, have received little empirical
evaluation. It is unclear whether, in practice, platforms indeed adjust their positions on the subscriber side
in response to competition on the advertiser side. Unlike simple tactics such as pricing, repositioning
requires new product design and skills at acquiring different types of customers.
This study provides the first empirical look at how platforms in multi-sided markets adjust their
positions in response to competition. We examine how local US newspapers adjust their positions relative
to each other on the subscriber side of the market following entry by Craigslist.org, a website providing
classified-ad services, on the classified-ad side of the market. The empirical analyses use panel data from
2000 2007 that matches information on incumbent local newspapers to data on the timing of Craigslists
entry into their markets. One strength of this research design is the unique nature of Craigslists entry
pattern, which gives rise to geographical and temporal variation. As described in more detail below, there
is strong anecdotal and empirical evidence that Craigslists entry decisions are exogenous with respect to
any anticipated response by incumbent newspapers.
There are four aspects to our empirical analyses. We first use information on the types of editor
categories to construct a profile of each newspapers content. Following recent work on strategic
positioning (Sweeting 2010, Wang 2011a, 2011b), we use these profiles to construct a measure of
differentiation among competing newspapers. We then study how Craigslists entry affects differentiation

2
among newspapers. Second, we investigate the conditions under which differentiation is likely to occur.
Hamilton (2004) and Baum (2005) show that liberal readers have different preferences for news content
than do conservative readers. Waldfogel (1999) and George and Waldfogel (2003) show that black and
Hispanic readers have different preferences for news content than do white and non-Hispanic readers,
respectively. Building off these prior studies, we use historical voting patterns and demographic data on
race to identify markets in which readers have heterogeneous preferences. We then study the extent to
which reader heterogeneity at the market level affects differentiation among newspapers following
Craigslists entry. Third, we analyze the mechanisms through which differentiation occurs. To accomplish
this, we investigate a newspapers decision to supply hard news, which emphasizes government,
politics, and business, or soft news, which emphasizes human interest and entertainment figures.
Building off work by George and Waldfogel (2006), we also investigate the extent to which a
newspapers ability to increase hard-news content following Craigslists entry is constrained by its
competition with the New York Times, which also provides hard news. Finally, we investigate how
differentiation affects newspapers subscription prices.
This study contributes to several literatures. First, we add to the broad literature on incumbent
response to entry. A subset of this literature focuses on differentiation. In these settings, a firm enters or
threatens to enter the market and upsets the existing equilibrium between incumbent firms, causing
incumbents to reposition themselves in response to the entrant. In some cases, incumbents will attempt to
differentiate away from the entrant, particularly if the incumbent is a large or dominant firm (e.g.,
Semadeni 2006) or has a decided cost or quality advantage (e.g., McGahan and Ghemawat 1994, Prince
and Simon 2010). In certain cases, however, the incumbents will move closer to the entrant (e.g., Thomas
and Wiegelt 2000). Recent literature in this area attempts to discern conditions under which an incumbent
will maintain its distance from or stay close to the entrant (e.g., de Figueiredo and Silverman 2007, Wang
2011a). A closely related subset of this literature studies how firms use product variety as a strategic
response to entry (e.g., Olivares and Cachon 2009, Watson 2009, Ren et al. 2011). Existing research on
incumbent response to entry focuses primarily on strategic responses in one-sided market settings. We
contribute to this literature by studying incumbent responses in multi-sided market settings.
A second literature to which we contribute uses formal theoretical models to understand
positioning strategies in multi-sided markets (e.g., Gabszewicz, Laussel, and Sonnac 2001, 2006, Peitz
and Valletti 2008). These studies extend earlier work by Steiner (1952), Beebe (1977), and Spence and
Owen (1977) by explicitly modeling media markets as two-sided markets with content readers and
advertisers on each respective side. Researchers find that as advertisers willingness to pay for each
content reader increases, media platforms have incentives to lower prices and cater to the majority taste in
an effort to sell more eyeballs to advertisers. In the extreme case where advertisers willingness to pay is

3
sufficiently high, platforms will provide identical content to cater to the majority taste, a phenomenon
often referred to as the Principle of Duplication or the Principle of Minimum Differentiation (Anderson
and Gabszewicz 2006). In contrast, when a market shock reduces demand from advertisers, media firms
will differentiate from each other so that they can raise subscription prices to capture more value on the
subscriber side (Gabszewicz, Laussel and Sonnac 2001, 2006, Peitz and Valletti 2008). Unlike the studies
on one-sided markets, differentiation in these studies is not in relation to the entrant, but rather in relation
to the other pre-existing incumbents. The theoretical models provide sparse details on how platforms
reposition themselves. Namely, it is unclear along which dimensions platforms choose to reposition
themselves and how platforms solve the coordination problem of deciding which platforms take which
new positions. Hence, not only do we provide the first empirical test of this theoretical prediction, but we
also describe how the repositioning occurs in a specific empirical context.
More generally, we contribute to the broad literature on platform strategies. A platform has a
range of strategic decisions to make, including how to overcome challenges in growing a platform
ecosystem (e.g., Adner 2012, Boudreau 2010, Boudreau forthcoming, Ceccagnoli et al. forthcoming,
Simcoe et al. 2009, Simcoe 2012) and how much to charge on different sides of the platform (Godes et al.
2009, Hagiu 2009, Jin and Rysman 2010, Seamans and Zhu 2011). In general, these studies and our paper
all demonstrate that a platform needs to account for the interdependency among different sides of its
market, and as conditions on one side of the market change, the platform may need to adjust its strategies
on its other sides.
Finally, this paper is related to the literature examining the impact of online channels on offline
markets (e.g., Kaiser 2006, Simon and Kadiyali 2007, Brynjolfsson et al. 2009, Forman et al. 2009, Choi
and Bell 2011, Goldfarb and Tucker 2011a, 2011b, Liebowitz and Zentner forthcoming). Most of these
studies focus on shifts in demand or pricing in offline markets. Our study complements these studies by
examining how entry by an online competitor affects offline firms positioning strategies.
The rest of the article is organized as follows. Section 2 provides background information of our
empirical setting. Section 3 describes our data. Section 4 presents results from our empirical analyses.
Section 5 discusses a number of robustness checks. We conclude in Section 6.

2. Empirical Setting
Craigslist is a website that specializes in online classified listings. It began its service in 1995 as an email
distribution list of friends in the San Francisco Bay Area, before becoming a web-based service in 1996.
Craigslist expanded into eight more US markets in 2000, four in 2001 and 2002 each, twelve in 2003, and
many more markets in recent years. As of 2010, Craigslist is available for more than 700 local markets in

4
70 countries.1 Craigslist currently serves over twenty billion page views per month, and is the 7th most-
visited web site in the United States.2 With over fifty million new classified advertisements each month,
as well as about sixty million unique visitors in the US each month,3 Craigslist is the leading classified-ad
service in any medium.
Newspapers are platforms that link together three different groups: subscribers, classified-ad
buyers, and display-ad buyers. 4 Historically, revenues from classified ads account for 40% of a
newspapers total revenues, on average (Vogel 2011). Craigslist offers classified ads for free in most
cases.5 In addition, ads on Craigslist are easy to search and are updated in real time, unlike ads in a
newspaper. Hence, the introduction of Craigslist into a newspapers local market has the potential to be
incredibly disruptive, leading to an almost immediate drop in a large portion of revenue on the classified-
ad side (Gurun and Butler forthcoming, Seamans and Zhu 2011). Based on theoretical predictions from
the multi-sided market literature, we therefore expect that when Craigslist enters a market, thereby
providing a negative shock to incumbent newspaper classified-ad revenues, newspapers will increase
differentiation from each other on the subscriber side of the market.
Our empirical setting provides several advantages for examining newspapers responses to
increased competition. First, temporal and geographical variation in the expansion of Craigslist into
different markets allows us to establish a causal relationship. Had Craigslist entered all markets at once, it
would be difficult to establish a causal relationship, as the observed responses by newspapers could easily
be attributed to other events that take place around the entry of Craigslist. Second, Craigslists product is
similar across markets in a given year, making it easy to compare entry events. The Craigslist webpage
for Boston in February 2003, for example, is nearly identical to that for Chicago in February 2003.6
Finally, there are hundreds of local newspaper markets with great variation in reader characteristics and
preferences across these markets. We therefore can trace out how newspaper responses differ by reader
characteristics.

1
http://www.craigslist.org/about/, accessed July 2010.
2
http://www.alexa.com/siteinfo/craigslist.org, accessed July 2010.
3
http://www. craigslist.org/about/factsheet and http://siteanalytics.compete.com/craigslist.org/, accessed July 2010.
4
Businesses use display ads, which often contain graphics or other artwork, to promote their products and services;
such ads are displayed alongside regular editorial content. In contrast, classified ads typically have no pictures or
other graphics. They are grouped entirely in a distinct section. In the classified-ads section, ads are usually grouped
under headings classifying the products or services, such as Automobiles, For Sale, and For Rent.
5
Craigslist charges for job listings in a small number of cities, and for apartment listings in New York City. Source:
http://www.craigslist.org/about/factsheet, accessed May 2011.
6
Historical screen shots of Craigslist are available via internetarchive.org. For examples, see historical Boston and
Chicago sites: http://web.archive.org/web/20030129082927/boston.craigslist.org/ and
http://web.archive.org/web/20030205062029/http://chicago.craigslist.org/, accessed June 2012.

5
3. Data and Variables
Our dataset combines Craigslist entry information, newspaper-level characteristics, and market-level
demographic and voting patterns. Summary statistics of all variables discussed below are provided in
Table 1.

3.1. Craigslist Entry

Information on the date of Craigslists entry into different markets is from Craigslist.org. During the time
period we study, Craigslist enters 308 markets.7 Using this information, we create a dummy variable
craigslist entrymt that equals one for all years t after Craigslist enters the newspapers local market m, and
zero otherwise. We define the relevant market to be the county in which the newspaper is based, an
approach consistent with other research in this area (e.g., Gentzkow and Shapiro 2010, Gentzkow Shapiro
and Sinkinson 2011) and consistent with Craigslists product offerings, which sometimes vary by county
or by state region.8 For example, Craigslist has separate pages for La Salle County, Illinois; Fairfield
County, Connecticut; Western Maryland; and Eastern North Carolina, to name a few.

3.2. Newspaper Differentiation Measure

Information on newspaper characteristics comes from two sources. We obtain ZIP-code circulation data
for 2000 2007 from the Audit Bureau of Circulations (ABC), a leading auditor of periodical information
in the US and many other countries. We use this circulation data to identify competitors for each
newspaper. ABC does not collect circulation data for low-circulation, small-town newspapers, so we
supplement the ABC data with data from Editor & Publisher International Yearbooks (E&P) and assume
that these small newspapers circulate only in the cities where they are based.9 The yearbooks contain data
on virtually every newspaper in the US and have been used extensively for newspaper studies (e.g.,
George and Waldfogel 2006, Chandra 2009, Gentzkow and Shapiro 2010). The US Census uses these
data to compile summary statistics for the annual Statistical Abstract of the United States. We consider
two newspapers as competitors if they circulate in the same ZIP code area and do not have the same
parent firm. We focus on newspapers that have a predominantly local focus. Accordingly, we remove the
New York Times, Wall Street Journal, and USA Today from our sample, although we use some
information from the New York Times, as described below.

7
The company lists the dates and locations of its expansion here: http://www. craigslist.org/about/expansion. From
November 2006, the site lists only the number of cities entered, so we supplement with information from historical
snapshots of Craigslist websites found on the Internet Archive.
8
The relevant newspaper market has been alternately defined at other levels, including the ZIP code (Chandra 2009)
and Metropolitan Statistical Area (MSA) (George and Waldfogel 2006).
9
E&P provides only aggregate circulation data for each newspaper.

6
 We use the data from ABC and E&P to construct our differentiation measures. To construct our
differentiation measures, we need to determine the type of news content offered by each newspaper. To
do this, we categorize each editors title for each newspaper from E&P into one of the following eleven
topical types: art, business, entertainment, home, local/regional, national/foreign, special topics, sports,
style/lifestyle, technology, and travel. For some of our analyses, we further group business, local/regional,
national/foreign and technology into a hard news category, and the rest into a soft news category.
Consistent with George and Waldfogel (2003), we assume that the editor types are positively correlated
with the newspapers content.10
To measure newspapers positions relative to each other, for newspaper i in year t, we first use
data on its topical types to construct a vector Vit with eleven elements. Each of these elements indicates
whether the newspaper has an editor for each of the eleven topical types, respectively. We then use ZIP-
level circulation data to identify the set of newspapers, Ci, with which newspaper i competes. Following
Sweeting (2010) and Wang (2011a), we compute the differentiation (in editor-type space) between
newspaper i and its competitor j, j Ci, in year t by locating the two newspapers in the product space
using Vit and Vjt, and measuring the angle distance (in radians) between their product location vectors
(normalized by ):
Vit V jt
Diffij ,t cos 1 / .
V V 2
jt
it

The differentiation measure ranges from 0 to 1. The greater its value, the more differentiated are
the two newspapers. In particular, when the differentiation measure is 0, the two newspapers have
identical sets of editors (minimum differentiation). When the distance measure is 1, there is no overlap
between the editor types at the two newspapers (maximum differentiation).
Figure 1 shows the average growth rates of Diffij,t for newspapers that experience Craigslists
entry five years pre- and post- Craigslists entry relative to the average growth rate for Craigslists entry
year and their 95% confidence intervals. We find that relative to Craigslists entry year, the average
growth rates are negative before Craigslists entry, suggesting that newspapers are becoming less
differentiated. In contrast, the average growth rates are all significantly positive after Craigslists entry,
suggesting that these newspapers are becoming more differentiated. Comparing the means for the pre-

10
To further justify our use of editor positions to proxy for the content produced by the newspaper, we use
newslibrary.com to collect information on the number of articles of different content types in each newspaper for the
set of newspapers that appear in both newslibrary.com and our dataset. We are able to match 257 newspapers in
newslibrary.com to our dataset for the year 2000. We identify content produced by each of these newspapers by
searching newslibrary.com for articles with the following words: art, business, entertainment, international, sports,
style, and technology. We find a high correlation between editor type and article content. Other research, such as
Gentzkow and Shapiro (2010), also relies on newslibrary.com for news-content analysis.

7
and post- growth rates, we find that Diffij,t increases by 7.1%, on average, after Craigslists entry.
Although the figure does not take into account newspapers that are unaffected by Craigslists entry, the
magnitude of effects of Craigslists entry on differentiation is similar to the ones identified in our
regression analyses below.
An implicit assumption of our dyad-level differentiation measure is that newspapers care about
their differentiation from each of their competitors. Prior research, however, shows that firms of a similar
type compete more intensely than do firms of different types (e.g., Chiou 2009). Hence, one might expect
that a newspaper cares most about a competitor whose product portfolio is located closest to it in
product space. Based on this intuition, we create an alternative differentiation measure for each
newspaper i by taking the minimum of all differentiation measures between newspaper i and its
competitors:
Diffit min{Diffij ,t }.
jCi

Diffit thus is at the newspaper level and measures the distance between newspaper i and its most-
similar competitor at time t. Each differentiation measure has its pros and cons. Although the dyad-level
measure may not accurately capture newspapers incentives, as newspapers may not care about
competitors very different from themselves, this measure allows us to fix a newspaper-competitor pair
and examine its change over time. As a result, this measure is not directly affected by other newspapers'
entry into or exit from their markets. In contrast, although the newspaper-level measure may more
accurately capture newspapers incentives, it is likely to be affected by other newspapers entering or
exiting their markets. We therefore report results based on both measures. In the robustness checks, we
show that our findings are robust to other measures of differentiation.

3.3. Newspaper Variables

Newspapers with a large number of competitors might have greater chances of receiving a low
differentiation value. To account for this, we create a variable number of competitorsit, which counts the
number of papers with which the newspaper competes. Log priceit is the natural logarithm of annual
subscription price for newspaper i for each year t. As indicated above, we also use the editor information
to measure the extent to which a newspaper focuses on hard or soft news. The variable pct hard newsit is
the number of editors of hard content (business, local, national/foreign, technology) at newspaper i for
each year t divided by number of positionsit, which is the total number of editor types at a newspaper. The
variable pct soft newsit is 1 pct hard newsit. We use the ABC to identify the markets in which New York
Times has circulation: New York Times deliverym. It is important to identify these markets, because other
research shows that the presence of the New York Times affects local newspapers content (George and

8
Waldfogel 2006). We use the E&P to construct several additional variables, primarily for use in
robustness tests. The variable unique names/no. positionsit is the number of unique content editor names
listed for each newspaper i for each year t divided by number of positionsit. The variable no. MIS
positionsit is a count of the number of positions listed under the employment category Management
Information Systems (MIS)/Interactive Services. The variable no. marketing positionsit is a count of the
number of positions listed under the employment category Marketing Positions. The variable ad
representativeit is a dummy variable that equals one if the newspaper reports sourcing display ads through
a representative; this variable is available for 2000 and 2007.

3.4. Market-Level Variables

It is important to control for Internet penetration within the relevant market, as Internet penetration may
affect newspapers strategies. Wallsten and Mallahan (2010) show that the number of Internet service
providers (ISPs) in a market is positively correlated with broadband quality and negatively correlated with
broadband price, and Kolko (2010) shows that the number of ISPs in a market is positively correlated
with broadband availability. Hence, we collect information on the number of ISPs at the ZIP code for
2000 2007 from the Federal Communications Commission (FCC).11 This information is then averaged
across all ZIP codes in each market, annually. To measure Internet penetration, we divide the average by
the market's population size and denote this variable as number of ISPsmt.
We collect demographic data on total population (populationm), fraction of population with age
above 65 (pct oldm), fraction of population with college degrees (pct college degreem), fraction of
households renting (pct rentersm), fraction of population with annual earnings less than $15,000 (pct
povertym), fraction of black population (pct blackm), and fraction of Hispanic population (pct hispanicm) at
the market (i.e., county) level for the year 2000 from the US Census Bureau.12 We use data from Leip
(2000) on the percent of voters in a market that voted for George Bush in 2000, which we call pct
conservativem and then define a variable pct liberalm as 1 pct conservativem. Using these two variables,
we construct political heterogeneitym, which is 1 (pct liberalm2 + pct conservativem2).13

4. Empirical Analysis
4.1. Impact of Craigslists Entry on Newspapers Positioning Strategies
We run a series of regression models using specifications of the following form:

11
Downloaded from the FCC at http://www.fcc.gov/wcb/iatd/comp.html, accessed May 2012.
12
Downloaded from the US Census Bureau at http://factfinder.census.gov, accessed May 2012.
13
The sum pct liberalm2 + pct conservativem2 is bounded below at 0.5 which occurs in those markets where half vote
liberal and half vote conservative. We consider these markets to have the greatest political heterogeneity. In contrast,
markets where pct liberalm or pct conservativem are close to one are those with little political heterogeneity.

9
(1A) Diffij,t = 0 + 1craigslist entrymt + Xijmt + ij + t + ijt,
(1B) Diffit = 0 + 1craigslist entrymt + Ximt + i + t + it,

where Diffij,t, Diffit and craigslist entrymt are described above and where Xijmt or Ximt includes time-varying
newspaper and market level characteristics and t are calendar year fixed effects. Eq. 1A is at the
newspaper-competitor dyad level, and accordingly includes newspaper-dyad fixed effects ij. craigslist
entrymt is one if either newspaper i or js local market is affected by Craigsliste entry. Xijmt is the average
of Ximt and Xjmt. Eq. 1B is at the newspaper level, and accordingly includes newspaper fixed effects i.
Panel A of Table 2 reports OLS regression results using the dyad-level differentiation measure,
Diffij,t, as the dependent variable. Column 1 includes newspaper-competitor dyad-level and calendar year
fixed effects and the number of ISPsmt, which varies at the market and year levels. Column 2 includes
number of competitorsij,t to capture changes in the number of competitors within and across markets over
time. We find that the coefficients of craigslist entrymt are significant and positive in both models. The
magnitude of the coefficients suggests that newspaper differentiation increases by about 6.5% following
the entry of Craigslist.14
We then repeat the analysis using the newspaper-level differentiation measure, Diffit, as the
dependent variable and report the results in Panel B of Table 2. Column 1 includes newspaper and
calendar year fixed effects and the number of ISPsmt. Column 2 also includes the number of competitors
newspaper i faces in year t, number of competitorsit. The coefficient of craigslist entrymt is positive in both
models but is significant only in the first column (p-value < 0.12 in the second column). Recall that the
construction of our newspaper-level differentiation measure relies on the minimum differentiation
between a newspaper and all its competitors. Hence, newspapers with a greater number of competitors are
more likely to have a lower differentiation value. As expected, the coefficient of number of competitorsit
is negative and significant. Overall, the results provide some evidence that differentiation between
incumbent newspapers increases following Craigslists entry into a market.
We next seek to identify the markets that experienced the largest change in differentiation. We
draw from prior literature on readership preferences (e.g., George and Waldfogel 2003, Baum 2005) to
identify market characteristics that might determine where the largest changes in differentiation occur.
We use these characteristics in specifications of the following form:

(2A) Diffij,t = 0 + 1craigslist entrymt + 2craigslist entrymt*characteristicm + Xijmt + ij + t + ijt,

14
The mean of Diffij,t for newspapers before Craigslists entry is 0.617. Hence, we compute the percentage increase
as 0.040/0.617 = 6.5%.

10
(2B) Diffit = 0 + 1craigslist entrymt + 2craigslist entrymt*characteristicm + Ximt + i + t + it,

where characteristicm is one of several market m characteristics described below and where the other
variables are as described above. Similar as above, when the dyad-level differentiation measure is used as
the dependent variable, characteristicm is measured as the average of the two values from each
newspapers local market.
We report the results based on the dyad-level differentiation measure in Columns 35 in Panel A
Table 2. Prior research indicates that reader preferences are particularly sharp across black and white
readers (George and Waldfogel 2003), so we focus first on pct blackm. Column 3 includes the interaction
craigslist entrymt*pct blackm which is positive and significant. Next, we add in the interaction craigslist
entrymt*pct hispanicm in Column 4. The coefficient on craigslist entrymt*pct blackm remains positive and
significant; the coefficient on craigslist entrymt*pct hispanicm is insignificant. Race is often correlated
with important socio-economic factors. To rule out the possibility that socio-economic status is driving
the results, we include a number of other interactions between craigslist entrymt and demographic
characteristics, including pct oldm, pct college degreem, pct povertym and pct renterm, in Column 5, as well
as the interaction craigslist entrymt*political heterogeneitym. As data on demographic variables are not
available for all markets, we have fewer observations when these demographic variables are used. The
coefficient on craigslist entrymt*pct blackm remains positive and significant. The coefficient on craigslist
entrymt*political heterogeneitym is insignificant. We conduct a similar analysis for the newspaper-level
differentiation measure and report the results in Columns 35 in Panel B. We find that craigslist
entrymt*pct blackm is significant and positive in all columns, while all other interaction variables are
insignificant.
The results presented in Table 2 provide evidence consistent with the idea that Craigslist entry
affects newspaper differentiation. Moreover, this effect appears to be increasing with reader heterogeneity
in the market. In particular, markets with a high proportion of black readers experience a large increase in
differentiation following Craigslists entry. This result is not surprising, given that prior research indicates
that reader preferences are particularly sharp across black and white readers (George and Waldfogel
2003). We next examine how newspapers change their positions following Craigslists entry.

4.2. How Do Newspapers Adjust Their Positions?

Prior studies show that preferences for media products differ across demographic and ideological
categories. Waldfogel (1999) and George and Waldfogel (2003), for example, find that black readers have
greater preferences for soft news (entertainment, sports, lifestyle) than for hard news (local and
foreign news, economy, science). Thus, following Craigslists entry into a market with a heterogeneous

11
reader population, we expect newspapers to adjust their positions by changing the composition of soft and
hard news. The question is how newspapers decide on which new position to occupy. It is natural to
expect that newspapers with large fractions of soft news before Craigslists entry increase the fractions of
soft news, while those with large fractions of hard news increase the fractions of hard news. In addition,
as black readers are less likely to access the Internet than white readers (Pew 2000), another potential
reason that some newspapers may shift toward soft news is that they want to better target black readers as
a way to generate more profits from the subscriber side to make up for the loss on the advertiser side.
To test these ideas, we employ specifications of the following type:

(3A) pct hard newsit = 0 + 1craigslist entrymt + 2craigslist entrymt* pct blackm
+ 3craigslist entrymt* pct blackm *type hi + Xmt + i + t + it,

(3B) pct soft newsit = 0 + 1craigslist entrymt + 2craigslist entrymt* pct blackm
+ 3craigslist entrymt* pct blackm *type si + Xmt + i + t + it,

where type hi (type si ) is a dummy variable that equals 1 if the newspaper has the highest proportion of
hard (soft) news content among all newspapers in its home market in 2000. Since we define the variables
type hi and type si using data from 2000, we restrict our analyses to the 20012007 period.
Table 3 reports OLS regression results based on Eqs. 3A and 3B; Columns 1 2 report results for
pct hard news (Eq. 3A) and Columns 34 report results for pct soft news (Eq. 3B). Given that these
equations include triple interaction terms, we first focus our analyses on a subset of the data before using
all the data with the triple interactions. Column 1 restricts attention to the subset of newspapers for which
type hi = 1. The coefficient on craigslist entrymt*pct blackm is positive and significant. Column 2 uses the
entire dataset; the coefficient on craigslist entrymt*pct blackm*type hi is positive and significant. Column 3
restricts attention to the subset of newspapers for which type si = 1. The coefficient on craigslist
entrymt*pct blackm is positive and significant. Column 4 uses the entire dataset; the coefficient on
craigslist entrymt*pct blackm*type si is positive and significant. The results from Table 3 suggest that,
following Craigslists entry into a market with a heterogeneous reader population, newspapers previously
known for hard content now offer even more hard content and newspapers previously known for soft
content now offer even more soft content.
Note that the coefficient on the triple interaction term in Column 4 is of greater magnitude than
that in Column 2. This suggests that newspapers that are known for producing hard-news content in a
market are less able to increase the amount of hard content they provide. One possible explanation is that
the New York Times, which is well known for providing national, international, and other hard-news

12
content (George and Waldfogel 2006), occupies the hard-news niche and therefore constrains local
newspapers' ability to add more hard news content. To investigate this further, we identify which
newspapers face competition from the New York Times in their home market and use this information to
run split-sample regressions, the results of which are reported in Columns 5 8 of Table 3. Column 5
provides results for pct hard news (Eq. 3A) on markets for which there is no New York Times home
delivery; Column 6 provides results for pct hard news (Eq. 3A) on markets for which there is New York
Times home delivery. The coefficient on the triple interaction term is positive and significant in the first
case and negative but not significant in the second case. The results from Columns 56 provide some
evidence in support of the idea that competition from the New York Times constrains local newspapers
from shifting towards more hard content. There is no evidence that newspapers in these markets increase
hard content, whereas there is evidence that newspapers in markets without the New York Times are able
to increase hard content. For comparison, we also look at soft news. Column 7 provides results for pct soft
news (Eq. 3B) on markets for which there is no New York Times home delivery; Column 8 provides
results for pct soft news (Eq. 3B) on markets for which there is New York Times home delivery. The
coefficients on the triple interaction terms are positive and significant in both cases.
The results from Table 3 suggest that newspapers increase differentiation from each other
following Craigslists entry by increasing the type of content they are most known for in the market. The
analyses focus on changes to pct hard news and pct soft news and, as described in the Data Section, the
hard and soft categories are created by combining several editor positions. To provide more detail on
how differentiation is achieved in a market, we next study the individual elements of pct hard news and
pct soft news, the results of which are presented in Table 4. Panel A of Table 4 focuses on the elements of
hard-news contentbusiness, local/regional news, national/foreign news, technology newsand studies
how Craigslists entry into markets with heterogeneous readers affects editor types at hard- and soft-type
newspapers. Note that the coefficients in this table are each from a separate regression. For brevity, we
report only the coefficients for the two triple interactions. The coefficients on craigslist entrymt*pct
blackm* type hi , which are all positive as expected, are from regressions similar to that presented in
Column 2 of Table 3; the coefficients on craigslist entrymt*pct blackm* type si , which are all negative as
expected, are from regressions similar to that presented in Column 4 of Table 3. The results in panel A
suggest that, following Craigslists entry into a market with a heterogeneous reader population,
newspapers previously known for hard content increase the amount of their hard content primarily by
increasing business news, and newspapers previously known for soft content decrease the amount of their
hard content primarily by decreasing local/regional news.
Panel B of Table 4 focuses on the elements of soft-news contentart, entertainment, home,
special features, sports news, style, and traveland studies how Craigslist's entry into markets with

13
heterogeneous readers affects editor types at hard- and soft-type newspapers. Note that, as in Table 4A,
each of the coefficients is from a separate regression. The results from this table are a little less clear. The
coefficients on craigslist entrymt*pct blackm*type hi were expected to be negative, but instead are a mix of
positive and negative coefficients. Coefficients on craigslist entrymt*pct blackm*type si were expected to
be positive but instead are a mix of positive and negative coefficients. The results in panel B suggest that,
following Craigslists entry into a market with a heterogeneous reader population, newspapers previously
known for hard content decrease the amount of their soft content primarily by decreasing art content, and
newspapers previously known for soft content increase the amount of their soft content primarily by
increasing their sports news and style content. Contrary to predictions, however, soft-type newspapers
also decrease entertainment news content.
Results from Table 4 corroborate the findings in Table 3. Namely, after Craigslists entry,
newspapers known for hard content tend to increase hard content and decrease soft content when located
in areas with a high black population. Likewise, newspapers known for soft content tend to increase soft
content and decrease hard content when located in areas with a high black population.

4.3. Impact of Repositioning on Newspaper Pricing

We next investigate the effect of differentiation on subscription price. Through further differentiation,
newspapers gain more pricing power, and as a result, they can capture more value. Hence, we expect
these affected newspapers to increase their subscription prices. Similar to our previous analysis on
differentiation, we examine the effect of craigslist entrymt and craigslist entrymt*pct blackm on the
logarithm of newspapers yearly subscription prices. The results are presented in Table 5. The coefficients
on craigslist entrymt in Columns 12 and craigslist entrymt*pct blackm in Columns 35 are positive and
significant. The result shows that newspapers which experience Craigslists entry and are located in an
area with a high black population experience an increase in prices. These affected newspapers appear to
try to capture more value from subscribers through differentiation.

5. Robustness Checks
This section outlines alternative explanations for our findings and the robustness tests undertaken to
address each of them. We group these alternative explanations into three broad categories of concern. The
first category deals with issues related to the potential endogeneity of Craigslists entry into a market. The
second category deals with issues related to our dependent variable. The third category considers various
other human-resource strategies that might account for the editor-level changes we observe.

14
5.1. Craigslists Entry
The first concern we address is the potential endogeneity of Craigslists entry into a market. Although our
fixed-effects specifications control for time-invariant unobservables specific to newspapers and locations,
it is still possible that Craigslists entry decisions may be correlated with some time-varying
unobservables. We undertake several approaches to address this concern and rule out alternative
explanations.
First, we take advantage of geographical and temporal variation in Craigslists entry to directly
examine which factors influence Craigslists entry decisions. The idea is that if these time-varying
location-specific unobservables affect both Craigslists entry decisions and newspapers characteristics,
we should observe correlations between Craigslists entry decisions and newspapers characteristics. Table
6 presents the results of hazard models that predict Craigslists entry into a newspapers market as a
function of market demographics and newspaper characteristics. Column 1 includes demographic
characteristics, such as populationm, pct oldm, pct college degreem, pct blackm, per capita incomem and pct
rentersm. According to Craigslist, new markets are selected based on the number of user requests for the
market. We thus expect populationm to be one of the main determinants of Craigslists entry into a
market. 15 Column 2 adds the time-varying market characteristics number of ISPsmt and number of
competitorsmt. Column 3 adds in the differentiation measure Diffmt. Column 4 adds in log pricemt. Number
of competitorsmt, Diffmt, and log pricemt are average measures of number of competitorsit, Diffit, and log
priceit, respectively, for all newspapers in a market. We find that populationm and pct rentersm are the only
significant predictors of Craigslists entry, and these factors are controlled in the foregoing analyses by
the use of fixed effects. There is no evidence that newspaper differentiation or price predicts Craigslists
entry. The results of the hazard analyses therefore provide us with some confidence that Craigslists entry
decisions are not based on newspaper characteristics, particularly those that vary over time.
Second, we conduct a falsification test using Craigslists entry patterns to examine the role of
location-specific unobservables. We compare differentiation strategies of newspapers that will ultimately
be affected by Craigslists entry (i.e., those newspapers located in counties Craigslist enters) prior to
Craigslists entry into their markets to the differentiation of newspapers located in counties that Craigslist
does not enter. If our assumption of the orthogonality between Craigslists entry and time-varying local
unobservables is violated in our fixed-effects specifications, our data will produce false positive
associations between Craigslists entry and the differentiation strategies of these affected newspapers in
periods prior to Craigslists entry in their markets. To check this, we first create a new variable, eventual
entrym, which is equal to one if Craigslist enters market m at any time before 2007, and zero otherwise.
We then repeat our main analyses by replacing craigslist entrymt with eventual entrym and only analyzing

15
http://www.craigslist.org/about/factsheet, accessed June 2011.

15
observations for which craigslist entrymt is zero. We report the results in Table 7. The effect of eventual
entrym is absorbed by the newspaper fixed effects. We find no significant correlation between the
outcome variables, Diffit, pct hard newsit, and pct soft newsit, and the interactions eventual entrym*pct
blackm, eventual entrym*pct blackm*type hi and eventual entrym*pct blackm*type si during periods prior to
Craigslists entry. The absence of such false positives further increases our confidence in the exogeneity
assumption.
As another robustness test, we construct an alternate measure of Craigslists entry. We use
internetarchive.org to access historical pages of Craigslist for each year for all markets in our sample.
From these pages we gather counts of the number of posts in each category. For example, in Boston on
February 7, 2003 under the category sale/wanted, there were 2,725 posts listed under general for sale
and 730 posts listed under items wanted.16 We then add up these category counts and take the logarithm
of the sum to create a variable number of postsmt. Over the years, Craigslist has added new categories,
such as personals. To ensure that we can compare the number of posts on Craigslist in different years, we
aggregate counts in only four categories (community, housing, jobs, and sales/wanted) that Craigslist has
had since its inception. When internetarchive.org archives the same Web page multiple times in a single
year, we take the average of these counts across the year. In unreported regressions, we use number of
postsmt in place of craigslist entrymt and replicate the analysis from Table 2. The results are qualitatively
unchanged.
Finally, we note that the concern about endogeneity of Craigslists entry is somewhat alleviated
by the peculiar nature of Craigslists corporate mission. Craigslist is incorporated as a for-profit company,
but it still uses the .org domain, whereas a for-profit company would typically use the .com domain.
According to Craigslist, the company does this because the .org domain symbolizes the relatively non-
commercial nature, public service mission, and non-corporate culture of Craigslist.17 Anecdotal evidence
in the popular press provides additional support for the idea that Craigslist may focus on objectives other
than profits. For example, in its annual ranking of the top private digital companies, Silicon Alley Insider
estimates that Craigslist generated about $150M in ad revenue in 2009, but could have generated at least
$1B.18 Thus, given the anecdotal evidence that the company does not try to maximize profits, but instead
pursues some other public-service mission-oriented objective, it is plausible that Craigslists entry into
local markets is orthogonal to the financial performance of newspapers in those markets.

16
See : http://web.archive.org/web/20030129082927/boston.craigslist.org/, accessed June 2012.
17
http://www.craigslist.org/about/factsheet, accessed May 2012.
18
http://www.businessinsider.com/sai-50-2009#5-craigslist-5, accessed May 2012.

16
5.2. Differentiation Measure
We also conduct robustness checks using alternative differentiation measures. For example, it is possible
that a newspaper cares instead about its most significant competitor. As one alternative differentiation
measure, after computing the distance measures between newspaper i and each of its competitors, we use
ZIP-code circulation data to estimate the significance of each competitor to newspaper i using the
following procedure:
1. Assume that newspaper i circulates in N ZIP codes with corresponding circulations
Circi1, , CirciN (we drop the year index t for simplicity).
2. Denote newspaper js circulations in these N ZIP areas as Circj1, , CircjN.

N
3. Let the total circulation of newspaper i be Circi k 1
Circik .

4. Following Chen (1996), the significance of newspaper j to newspaper i can be computed

Circik

N
as: k 1 Circ jk .
Circi
The measure accounts for two factors: the competitors market size in each of the markets served
by newspaper i, and the strategic importance of each of the markets for newspaper i. Note the asymmetry
of this measure: If newspaper j is the most significant competitor to newspaper i, it is not necessary that
newspaper i is the most significant competitor to newspaper j. Once we compute the significance of each
competitor to newspaper i, we then define Diffi,t to be the distance between newspaper i and its most
significant competitor in year t. Results using this alternate differentiation measure, presented in Column
2 of Table 8, are consistent with the results presented herein (Column 1 includes the results from Column
5 of Table 2B for comparison).
It is also possible that a newspaper cares about how it differentiates from the average competitor
in its market. As another alternate differentiation measure, we define the differentiation measure for each
newspaper i by taking the average of all differentiation measures between newspaper i and its
competitors. Results using this average differentiation measure, presented in Column 3 of Table 8, are
consistent with the results presented herein.
Finally, although our dyad-level differentiation measure is robust to newspaper entry into and exit
from markets in which a focal newspaper operates, to further alleviate the concern that newspaper entry
and exit may shift the newspaper-level differentiation measure, we restrict our attention to only that
subset of newspapers that remains in the sample by 2007. Results using this subsample, presented in
Column 4 of Table 8, are consistent with the results presented herein. As Table 8 indicates, the
coefficients of craigslist entrymt*pct blackm are of similar magnitude across different columns. This

17
pattern leads us to believe that while the differentiation measures we use in our analyses rely on different
assumptions, our results are robust to the relaxation of these assumptions.

5.3. Human-Resource Strategies

The third category considers other types of dynamics that might drive the results. One possibility is that
newspapers respond to Craigslists entry by lowering costs and that differentiation is a second-order effect
of this strategy. This possibility might play out as follows: Newspapers respond to Craigslists entry by
firing editors and other employees, but are likely to first fire editors who are not at the core of the
newspapers focus. Thus, a newspaper that is known for its sports content might be more likely to fire its
business (or other hard content) editor before its sports editor. Column 1 of Table 9 displays the effect of
Craigslists entry on the number of editors at the newspaper (number of positionsit); there is no evidence
that Craigslists entry differentially affects newspapers that are known for certain types of content in areas
with a high black population. We also consider whether Craigslists entry leads a newspaper to consider
other human-resource strategies, such as requiring existing workers to cover more editorial positions as a
way for the newspaper to lower costs, changing the number of marketing or Management Information
System (MIS) professionals at the paper, or outsourcing its advertising function to a third party. None of
the results presented in Columns 2 5 of Table 9 provides evidence of these types of strategies.

6. Conclusion
Our paper examines the conditions under which incumbent newspapers respond to entry by Craigslist on
the classified-ad side of the market by increasing differentiation from other newspapers on the market's
subscriber side. We first show that newspapers increase differentiation from each other following entry by
Craigslist. We then provide evidence that the effects are stronger in markets where readers are more likely
to have heterogeneous tastes for news. In particular, differentiation following entry by Craigslist increases
as the proportion of black readers increases. We find no evidence, however, that differentiation is
increasing in ideologically heterogeneous markets. We further study how the actual process of
differentiation unfolds. In our setting, differentiation is accomplished by hard-news-content newspapers
increasing the amount of hard news they provide and soft-news-content newspapers increasing the
amount of soft news they provide. We also show that the New York Times constrains the ability of the
hard-news-content newspapers to increase the amount of hard news they provide after Craigslists entry.
Finally, newspapers increase subscription price following Craigslists entry, indicating that newspapers
try to capture more value from subscribers through differentiation.
Broadly, our study helps build an understanding of how competition in multi-sided markets
affects platforms differentiation strategies. This issue is important because firms in many industries today

18
operate in multi-sided market settings. Moreover, because of technological convergence, the boundaries
between these industries are becoming more blurred for advertisers, as they can reach relevant consumers
through a variety of channels, such as TV, the Internet, and mobile devices. Platforms that traditionally
rely heavily on advertising revenues will need to adjust their business strategies in the future. It appears
that firms in the US newspaper industry are responding to this challenge by providing more specialized
content for their readers.
Our research also suggests avenues for future research. For example, as a newspaper is a platform
operating in a three sided marketit serves classified-ad buyers, display-ad buyers and subscribers
future research could also explore how the shift in newspaper positioning on the subscriber side affects
the display-ad side. As newspapers become more differentiated after Craigslists entry, it is possible that
they attract more differentiated groups of display advertisers.19
Our research is not without limitations. One potential limitation is our inability to measure reader
preferences other than using coarse demographic and voting patterns. Our study, however, is heavily
grounded in prior research in this area which uses similar measures (Waldfogel 1999, George and
Waldfogel 2003, Hamilton 2004, Baum 2005). We also assume that reader preferences do not vary over
time so that newspaper differentiation occurs in response to the competitive shock brought about by
Craigslists entry, and not changes in reader preferences. This seems to be a reasonable assumption given
the short time span of our dataset (2000 2007). We also note that other research shows that it is difficult
to shift reader preferences much over time. Research by Listokin and Snyder (2010) and Gentzkow
Shapiro and Sinkinson (2011), for example, show no link between news content and voting behavior.

19
As a preliminary analysis of this idea, we obtain data from TNS on yearly display-ad buys for 20022007. The
dataset includes information for only 139 newspapers. We group types of advertisers into 11 categories (airline,
auto, business, clothing, entertainment, finance, home construction, information and technology, recruitment,
shopping, and other) and count the number of ads each newspaper displays in each category. We then follow the
same methodology described in our Data Section to create dyad-level differentiation measures between any two
competing newspapers. While recognizing the potential sample-selection problem with this dataset, we conduct a
similar analysis as that in Panel A of Table 2 and find that Craigslists entry indeed led to a significant increase in
display-ad differentiation, but the interaction between Craigslists entry and fractions of black readers is
insignificant.

19
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 Table 1: Summary Statistics

Variable Mean Std. Dev. Min Max Data Source

Craigslist Entry 0.144 0.351 0.000 1.000 craigslist.org
Dyad-Level Differentiation 0.637 0.208 0.000 1.000 ABC; E&P
Newspaper-Level Differentiation 0.453 0.200 0.000 1.000 ABC; E&P
Log Subscription Price 4.925 0.332 0.693 9.571 E&P
Number of Posts 3,827 19,830 0.000 295,932 internetarchive.org
Number of ISPs 0.049 0.054 0.000 0.816 FCC
Number of Competitors 8.200 10.604 1.000 211.000 ABC; E&P
New York Times Delivery 0.234 0.423 0.000 1.000 ABC
Number of Positions 6.089 3.322 0.000 15.000 E&P
Pct Hard News 0.249 0.172 0.000 1.000 E&P
Unique Names/No. Positions 0.923 0.176 0.167 2.000 E&P
No. MIS Positions 1.411 1.429 0.000 21.000 E&P
No. Marketing Positions 0.611 0.940 0.000 9.000 E&P
Ad Representative (2000, 2007) 0.690 0.465 0.000 2.000 E&P
Population (100,000s) 4.717 11.729 0.061 95.193 Census
Pct Black 0.069 0.099 0.001 0.711 Census
Pct Hispanic 0.072 0.119 0.003 0.898 Census
Pct Old 0.139 0.032 0.049 0.357 Census
Pct College Degree 0.143 0.051 0.049 0.317 Census
Pct Poverty 0.182 0.024 0.108 0.299 Census
Pct Renter 0.319 0.082 0.119 0.799 Census
Political Heterogeneity 0.474 0.036 0.163 0.500 uselectionatlas.org

23
 Table 2: Effect of Craigslists Entry on Differentiation (OLS Models)

Panel A: Dyad-Level Differentiation Measure

(1) (2) (3) (4) (5)
Craigslist Entry 0.040*** 0.040*** 0.033*** 0.038*** -0.063
[0.005] [0.005] [0.006] [0.007] [0.092]
Craigslist Entry*Pct Black 0.105** 0.100* 0.155**
[0.052] [0.052] [0.065]
Craigslist Entry*Pct Hispanic -0.074 -0.041
[0.046] [0.054]
Craigslist Entry*Political Heterogeneity -0.008
[0.120]
Craigslist Entry*Pct Old 0.155
[0.220]
Craigslist Entry*Pct Poverty 0.533*
[0.286]
Craigslist Entry*Pct College 0.510***
[0.158]
Craigslist Entry*Pct Renter -0.236***
[0.069]
Number of Competitors 0.003 0.003 0.003 0.001
[0.002] [0.002] [0.002] [0.003]
Number of ISPs -0.094 -0.086 -0.079 -0.102 0.045
[0.090] [0.090] [0.090] [0.090] [0.100]
Year Fixed Effects Yes Yes Yes Yes Yes
Dyad-Level Fixed Effects Yes Yes Yes Yes Yes
Number of Observations 18,616 18,616 18,616 18,616 13,934
Number of Dyads 5,317 5,317 5,317 5,317 4,739
Adjusted R-squared 0.040 0.040 0.040 0.040 0.031
Notes: The table reports OLS results from regressions on dyad-level differentiation, 2000-2007. Craigslist Entry is a
dummy variable that equals one for all years after Craigslist enters the county in which any one of the two newspapers
is based, and zero otherwise. Heteroskedasticity-adjusted standard errors, clustered at the newspaper-competitor dyad
level, are included in brackets. * significant at 10%; ** significant at 5%; *** significant at 1%.

24
 Panel B: Newspaper-Level Differentiation Measure
(1) (2) (3) (4) (5)
Craigslist Entry 0.026** 0.020 0.008 0.008 -0.126
[0.013] [0.013] [0.015] [0.017] [0.174]
Craigslist Entry*Pct Black 0.172* 0.172* 0.208**
[0.093] [0.095] [0.103]
Craigslist Entry*Pct Hispanic 0.001 0.022
[0.072] [0.087]
Craigslist Entry*Political Heterogeneity -0.125
[0.284]
Craigslist Entry*Pct Old 0.193
[0.315]
Craigslist Entry*Pct Poverty 0.688
[0.448]
Craigslist Entry*Pct College -0.047
[0.215]
Craigslist Entry*Pct Renter 0.095
[0.146]
Number of Competitors -0.008*** -0.008*** -0.008*** -0.009***
[0.001] [0.001] [0.001] [0.002]
Number of ISPs 0.203* 0.219** 0.222** 0.222** 0.254**
[0.106] [0.107] [0.107] [0.106] [0.120]
Year Fixed Effects Yes Yes Yes Yes Yes
Newspaper Fixed Effects Yes Yes Yes Yes Yes
Number of Observations 4,194 4,194 4,194 4,194 3,264
Number of Newspapers 917 917 917 917 864
Adjusted R-squared 0.020 0.037 0.038 0.038 0.039
Notes: The table reports OLS results from regressions on newspaper differentiation, 2000-2007. Craigslist entry is a
dummy variable that equals one for all years after Craigslist enters the county in which the newspaper is based, and zero
otherwise. Heteroskedasticity-adjusted standard errors, clustered at the market level, are included in brackets. * significant
at 10%; ** significant at 5%; *** significant at 1%.

25
 Table 3: Effect of Craigslists Entry and Race on News Type
(1) (2) (3) (4) (5) (6) (7) (8)
Dependent Variable Pct Hard News Pct Soft News Pct Hard News Pct Soft News
Sample Type H Full Sample Type S Full Sample No NYT NYT No NYT NYT
Craigslist Entry -0.035 0.020 -0.125 0.023 0.021 0.008 0.022 0.048
[0.057] [0.016] [0.116] [0.031] [0.020] [0.030] [0.037] [0.074]
Craigslist Entry*Pct Black 0.476* -0.143 2.331*** 0.007 -0.105 -0.221 0.023 0.104
[0.280] [0.112] [0.710] [0.235] [0.126] [0.343] [0.249] [1.071]
Craigslist Entry*Type H 0.021 0.015 0.024
[0.030] [0.030] [0.045]
Craigslist Entry*Pct Black*Type H 0.638** 0.828*** -1.197
[0.284] [0.253] [0.887]
Craigslist Entry*Type S -0.033 -0.023 -0.130
[0.065] [0.056] [0.168]
Craigslist Entry*Pct Black*Type S 2.264*** 1.475* 2.632*
[0.728] [0.850] [1.384]
Number of Competitors -0.006** 0.000 -0.006 -0.005 0.002 -0.006*** -0.008** 0.014*
[0.002] [0.002] [0.008] [0.003] [0.002] [0.001] [0.004] [0.008]
Number of ISPs 2.993 0.010 -0.513 -0.266 -0.057 0.236 -0.018 -1.026
[1.816] [0.147] [2.948] [0.269] [0.153] [0.335] [0.257] [0.789]
Newspaper Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes
Year Fixed Effects Yes Yes Yes Yes Yes Yes Yes Yes
Observations 375 3,393 307 2,879 2,598 795 2,176 703
Number of Newspapers 91 894 83 818 825 414 740 368
Adjusted R-squared 0.048 0.003 0.079 0.027 0.007 0.023 0.035 0.039
Notes: The table reports results from OLS fixed effects models of craigslists entry on the log-odds of the newspapers percent of hard news (Columns 1-2, 5-6) or
soft news (Columns 3-4, 7-8), 2001-2007. Type H = 1 if the newspaper was the newspaper with the highest proportion of hard news among all the newspapers in
the newspapers home county in 2000. Type S = 1 if the newspaper was the newspaper with the highest proportion of soft news among all the newspapers in the
newspapers home county in 2000. No NYT = 0 if the New York Times had not started home delivery in the focal newspapers home county by 2000; NYT = 1 if
the New York Times had started home delivery in the focal newspapers home county by 2000. Heteroskedasticity-adjusted standard errors (clustered at county
level) in parentheses. * significant at 10%; ** significant at 5%; *** significant at 1%.

26
 Table 4: Effect of Craigslists Entry on Newspaper Editor Positions

Panel A: Hard News Categories

(1) (2) (3) (4)
Local/Regional National/Foreign
Dependent Variable: Pct Editor Type Business News News Technology
Craigslist Entry*Pct Black*Type H 0.207* 0.216 0.046 0.086
[0.117] [0.239] [0.037] [0.083]
Craigslist Entry*Pct Black*Type S -0.063 -0.770*** -0.053 -0.017
[0.094] [0.269] [0.060] [0.047]
Notes: The table reports results from OLS fixed effects models on the percent of a newspapers editors of various
types, 2001-2007. Each coefficient is from a separate regression. For brevity, we only report the coefficients for the
two triple interactions. Type H = 1 if the newspaper was the newspaper with the highest proportion of hard news
among all the newspapers in the newspapers home county in 2000. Type S = 1 if the newspaper was the newspaper
with the highest proportion of soft news among all the newspapers in the newspapers home county in 2000.
Heteroskedasticity-adjusted standard errors (clustered at county level) in parentheses. * significant at 10%; **
significant at 5%; *** significant at 1%.

Panel B: Soft News Categories

(1) (2) (3) (4) (5) (6) (7)
Dependent Variable: Pct Editor Type Art Entertainment Home Specials Sports Style Travel
Craigslist Entry*Pct Black*Type H -0.297* -0.172 -0.152 0.003 0.287 -0.151 0.003
[0.165] [0.124] [0.116] [0.179] [0.179] [0.110] [0.033]
Craigslist Entry*Pct Black*Type S -0.155 -0.174** 0.152 -0.264 0.673*** 0.204* -0.044
[0.257] [0.076] [0.116] [0.196] [0.209] [0.114] [0.064]
Notes: The table reports results from OLS fixed effects models on the percent of a newspapers editors of various
types, 2001-2007. Each coefficient is from a separate regression. For brevity, we only report the coefficients for the
two triple interactions. Type H = 1 if the newspaper was the newspaper with the highest proportion of hard news
among all the newspapers in the newspapers home county in 2000. Type S = 1 if the newspaper was the newspaper
with the highest proportion of soft news among all the newspapers in the newspapers home county in 2000.
Heteroskedasticity-adjusted standard errors (clustered at county level) in parentheses. * significant at 10%; **
significant at 5%; *** significant at 1%.

27
 Table 5: Effect of Craigslists Entry and Demographics on Yearly Subscription Price (Ln)

(1) (2) (3) (4) (5)

Craigslist Entry 0.033** 0.034** 0.022 0.024 0.145
[0.015] [0.015] [0.016] [0.019] [0.190]
Craigslist Entry*Pct Black 0.164** 0.160** 0.219***
[0.065] [0.068] [0.077]
Craigslist Entry*Pct Hispanic -0.022 -0.025
[0.049] [0.052]
Craigslist Entry*Political Heterogeneity -0.304
[0.291]
Craigslist Entry*Pct Old -0.090
[0.256]
Craigslist Entry*Pct Poverty 0.227
[0.473]
Craigslist Entry*Pct College 0.317
[0.210]
Craigslist Entry*Pct Renter -0.141
[0.164]
Number of Competitors 0.001 0.001 0.001 -0.000
[0.001] [0.001] [0.001] [0.002]
Number of ISPs -0.053 -0.055 -0.052 -0.055 -0.079
[0.395] [0.396] [0.396] [0.398] [0.480]
Year Fixed Effects Yes Yes Yes Yes Yes
Newspaper Fixed Effects Yes Yes Yes Yes Yes
Number of Observations 3,495 3,495 3,495 3,495 2,952
Number of Newspapers 870 870 870 870 823
Adjusted R-squared 0.013 0.013 0.014 0.013 0.014
Notes: The table reports OLS results from regressions on log subscription price, 2000-2007. Craigslist Entry
is a dummy variable that equals one for all years after Craigslist enters the market in which the newspaper is
based, and zero otherwise. Heteroskedasticity-adjusted standard errors, clustered at the county level, are
included in brackets. * significant at 10%; ** significant at 5%; *** significant at 1%.

28
 Table 6: Determinants of Craigslist Entry (Hazard Model; Marginal Effects Reported)

Model (1) (2) (3) (4)

Population 0.001*** 0.001*** 0.001***
[0.001] [0.000] [0.000] [0.000]
Pct Old 0.062 0.060 0.063 0.049
[0.055] [0.045] [0.046] [0.046]
Pct College Degree 0.031 0.000 0.001 0.001
[0.025] [0.034] [0.033] [0.033]
Pct Black -0.018 -0.019 -0.020 -0.019
[0.019] [0.017] [0.017] [0.017]
Pct Rental 0.135 0.133* 0.133* 0.126*
[0.101] [0.070] [0.069] [0.071]
Number ISPs -0.093 -0.097 -0.082
[0.066] [0.069] [0.066]
Number of Competitors 0.001 0.001 0.000
[0.000] [0.000] [0.000]
Differentiation 0.007 0.008
[0.009] [0.009]
Log Price 0.008
[0.005]
Year Dummies Yes Yes Yes Yes
Observations 2,393 2,393 2,393 2,393
Pseudo R-squared 0.497 0.517 0.518 0.520
Notes: The table reports marginal effects from a hazard model predicting Craigslists entry into a
county, 2000-2007. The dependent variable equals one when the county experiences Craigslists
entry, zero otherwise. Craigslists entry is an absorbing state so the county is dropped from the
sample in the years after the dependent variable becomes one. The controls include demographic
variables at the county level and newspaper characteristics which have been averaged across all the
newspapers in the county. Heteroskedasticity-adjusted standard errors are included in brackets. *
significant at 10%; ** significant at 5%; *** significant at 1%.

29
 Table 7: Falsification Check: Effect of Eventual Craigslists Entry on Newspaper Types

(1) (2) (3)

Dependent Variable Differentiation Pct Hard News Pct Soft News
Eventual Entry*Pct Black 0.373 0.5962 -0.0113
[0.686] [1.5874] [0.6386]
Eventual Entry*Pct Black*Type H -1.3353
[1.5164]
Eventual Entry*Pct Black*Type S 1.9575
[1.6494]
Number of Competitors -0.013*** -0.0100* 0.0027
[0.002] [0.0059] [0.0022]
Number of ISPs 0.166 -0.3127 0.0805
[0.116] [0.3151] [0.1593]
Newspaper Fixed Effects Yes Yes Yes
Year Fixed Effects Yes Yes Yes
Observations 3,589 2,808 2,365
Number of Newspapers 899 835 756
Adjusted R-squared 0.036 0.026 0.026
Notes: The table reports OLS results from regressions where the observations are conditional on Craigslist not
having yet entered market. Eventual entry equals one if craigslist enters the newspapers home market between
2000-2007. The dependent variable in Model (1) is newspaper-level differentiation. The dependent variables in
Models (2) - (3) are pct hard news (log odds) and pct soft news (log odds), respectively. These models are run on
data for years 2001-2007. Heteroskedasticity-adjusted standard errors, clustered at the market level, are included
in brackets. * significant at 10%; ** significant at 5%; *** significant at 1%.

30
 Table 8: Effect of Craigslists Entry on Differentiation, Robustness Checks

(1) (2) (3) (4)

Craigslist Entry -0.126 0.062 -0.131 -0.166
[0.174] [0.204] [0.096] [0.189]
Craigslist Entry*Pct Black 0.208** 0.258** 0.210*** 0.238**
[0.103] [0.113] [0.075] [0.108]
Craigslist Entry*Pct Hispanic 0.022 -0.014 0.043 0.024
[0.087] [0.094] [0.061] [0.099]
Craigslist Entry*Political Heterogeneity -0.125 0.350 -0.110 -0.165
[0.284] [0.327] [0.144] [0.288]
Craigslist Entry*Pct Old 0.193 -0.212 0.327 0.267
[0.315] [0.321] [0.204] [0.329]
Craigslist Entry*Pct Poverty 0.688 -0.957** 0.487* 0.996*
[0.448] [0.456] [0.283] [0.543]
Craigslist Entry*Pct College -0.047 0.003 0.081 0.035
[0.215] [0.249] [0.145] [0.251]
Craigslist Entry*Pct Renter 0.095 -0.125 0.078 0.066
[0.146] [0.195] [0.094] [0.150]
Number of Competitors -0.009*** -0.002 -0.000 -0.008***
[0.002] [0.002] [0.001] [0.002]
Number of ISPs 0.254** 0.131 0.076 0.403**
[0.120] [0.121] [0.086] [0.171]
Year Fixed Effects Yes Yes Yes Yes
Newspaper Fixed Effects Yes Yes Yes Yes
Number of Observations 3,264 3,264 3,264 2,379
Number of Newspapers 864 864 864 510
Adjusted R-squared 0.039 0.023 0.044 0.046
Notes: The table reports OLS results from regressions on different newspaper differentiation measures, 2000-2007.
Column 1 replicates the original results from the body of the paper (Panel B of Table 2, Column 5). In Column 2,
differentiation is defined in relation to largest competitor. In Column 3, differentiation is defined as the average
distance to all its competitors. In Column 4, the original newspaper-level differentiation measure is used on the
subsample of papers that remain in the sample through 2007. Craigslist Entry is a dummy variable that equals one
for all years after Craigslist enters the county in which the newspaper is based, and zero otherwise.
Heteroskedasticity-adjusted standard errors, clustered at the county level, are included in brackets. * significant at
10%; ** significant at 5%; *** significant at 1%.

31
 Table 9: Effect of Craigslists Entry on Newspaper HR Strategy

(1) (2) (3) (4) (5)

Number of Names/ No. MIS No. Marketing Display
Dependent Variable Positions Positions Positions Positions Ad Rep
Craigslist Entry*Pct Black*Type H -1.054 0.462 -0.203 1.076 0.318
[5.166] [0.534] [1.841] [1.027] [0.349]
Craigslist Entry*Pct Black*Type S -0.985 -1.422 2.881 0.889 1.378
[5.207] [1.251] [2.375] [0.721] [1.026]
Notes: The table reports results from OLS fixed effects models on the percent of a newspapers editors of various
types, 2001-2007. Each coefficient is from a separate regression. For brevity, we only report the coefficients for the
two triple interactions. Type H = 1 if the newspaper was the newspaper with the highest proportion of hard news
among all the newspapers in the newspapers home county in 2000. Type S = 1 if the newspaper was the newspaper
with the highest proportion of soft news among all the newspapers in the newspapers home county in 2000.
Heteroskedasticity-adjusted standard errors (clustered at county level) in parentheses. * significant at 10%; **
significant at 5%; *** significant at 1%.

Figure 1: Effect of Craigslists Entry on Differentiation

0.20
% Growth Rate of Differentiation Relative
to the Entry Year

0.10

0.00

-0.10
-5 -4 -3 -2 -1 0 1 2 3 4 5
Years Since Craigslist Entry

Notes: This figure plots the coefficient estimates and robust standard errors from an OLS regression with
newspaper-competitor dyad fixed effects, calendar year effects and a year-relative-to-Craigslist-entry dummies for
five years pre- and post- Craigslists entry (omitting year of Craigslist entry) for newspapers that experience
Craigslists entry. The dependent variable is log(Diffij,t). The solid line connects the coefficients; the dotted lines are
the 95% confidence intervals.

32