Content aggregation by platforms: The case of the news media

• Published date: 01 December 2017
• Author: Lesley Chiou,Catherine Tucker
• DOI: http://doi.org/10.1111/jems.12207
• Date: 01 December 2017

Received: 21 January 2016 Revised: 6 January 2017 Accepted: 19 January 2017

DOI: 10.1111/jems.12207

ORIGINAL ARTICLE

Content aggregation by platforms: The case of the news media

Lesley Chiou1Catherine Tucker2,3

1Economics Department, Occidental College,

CA (Email: lchiou@oxy.edu)

2MIT Sloan School of Management, MIT,

Cambridge, MA (Email: cetucker@mit.edu)

3National Bureau of Economic Research

Abstract

The digitization of content has led to the emergence of platforms that draw informa-

tion from multiple sources. This paper investigates whether aggregation of content

by a single platform encourages users to “skim” content or to investigate it in depth.

We study a contract dispute that led a major aggregator to removeinformation from a

major content provider. After the removal, users were less likely to investigate addi-

tional, related content in depth, particularly sources that were horizontally or vertically

differentiated.

1INTRODUCTION

In recent years, the digitization of content has led to the prominence of platforms as aggregators of content in many economi-

cally important industries, including media and Internet-based industries (Evans & Schmalensee, 2012). These new platforms

consolidate content from multiple sources into one place, thereby lowering the transaction costs of obtaining content and intro-

ducing new information to consumers. Although an extensive literature focuses on pricing and piracy by platforms (Danaher,

Dhanasobhon, Smith, & Telang, 2010; Oberholzer-Gee & Strumpf, 2007; Rob & Waldfogel, 2006), little is known about how

the quantity and quality of content provided by a platform influences consumer search.

We examine how a change in content provided by a platform affects subsequent consumer search for different types of infor-

mation and its consequences for content providers. For identification, we exploit a contract dispute as an exogenous shifter

of content on a major news aggregator, Google News. In January 2010, after a breakdown in licensing negotiations, Google

removed all news articles that were syndicated by a major content provider, The Associated Press (AP), from its news aggrega-

tor (Haddad, 2010). These articles were typically shortened versions of stories that appeared in a select number of newspapers

associated with The AP.

Our setting presents an attractive opportunity to study these issues for several reasons. First, content aggregation is a promi-

nent concern in the news media industry due to the rapid growth of digital news content, multiple content providers who have

expressed fears about the viability of their business model in the presence of aggregators, and the prominence of platforms such

as Google News. Second, our experiment studies a large shock as we focus on arguably two of the largest players in U.S. news

media industry, Google Newsand The Associated Press. Google News is among the most-read news aggregators, automating the

aggregation of news content from 25,000 news sources. The Associated Press is a prominent content provider formed in 1846

to fund news-gathering activities between its newspaper participants. The Associated Press has received 51 Pulitzer Prizes,

reflecting its status in the news industry and its investments in journalism. Finally, due to the scale of The Associated Press,

the removal of content most likely did not reflect the wishes of a particular newspaper or any self-selection. The AP formed

historically with deep ties to the news media, so the content removal of The AP captures a broader effect of content change for

news media.

Earlier versions of this paper were circulated under the titles “Copyright, Digitization, and Aggregation” and “Newsand Online Aggregators.” We thank Robert

Seamans for useful comments. Wethank Chr istopherHafer of Experian Hitwise. We also thank Shreya Bhaskaran, Cassandra Crosby, Sara Mcknight, Anthony

Quach, and Yueh Yuefor excellent research assistance. Financial support from the NBER Innovation Policy Group and NET Institute (www.NETinst.org) is

gratefully acknowledged.

J Econ Manage Strat. 2017;26:782–805. © 2017 WileyPeriodicals, Inc. 782wileyonlinelibrary.com/journal/jems

CHIOU AND TUCKER 783

In particular, we empirically test for two theoretical effects. We first look for a “scanning effect” that may exist where con-

sumers use platforms to scan the extracts of content without clicking through to pursue more in-depth material. To empirically

test for this, we collect data on monthly visits and search intensity and examine whether overall traffic to Google News shifted

after the contract dispute relative to Yahoo! News, which continued to provide The Associated Press content during this period.

We do not find evidence of a scanning effect, as overall traffic to Google News and Yahoo! News remained relatively com-

parable during our time period. Our results suggest that the reduction in quality may not affect overall traffic whereas prior

work suggests that other changes, such as increasing customization of content, can increase traffic byas much as 50% (Athey &

Mobius, 2012).

Second, a “traffic effect” may exist where consumers use platforms to explore new material in more depth. To empirically

test for a traffic effect, we compare subsequent website visits by users of Google News before and after the contract dispute

relative to users of Yahoo! News, which continued to provide The Associated Press content during this period. Our results

indicate that after The Associated Press content was removed from Google News, 28% fewer users subsequently visited news

sites after navigating to Google News relative to users who used Yahoo! News. The pattern was driven by news websites with

local content or news websites with national recognition as high quality. Thus, we find evidence that the traffic effect is large, as

aggregators may guide users to new content. Our results are comparable in magnitudes to concurrent and recent work that finds

that technological adoption can increase consumers’ consumption of content by 26–30% (Athey & Mobius, 2012; Xu, Forman,

Kim, & Van Ittersum, 2014). Back-of-the-envelope calculations suggest that the removal of content potentially led to a decrease

of 110 million visits each month from Google News to news media websites hosted in the United States. We also explore the

institutional relationship between news sites and The AP and find that websites with stronger ties to The AP suffered a drop in

traffic after the dispute.

Our results inform legal and public policy debates. Recent regulation in the European Union attempts to make content on

a platform an “opt-in” decision (Eddy, 2013; Pfanner, 2012), where a content provider has the right to decide whether or not

their content appears on the aggregation platform. Our results suggest that the decision to opt-in to an aggregation platform

should depend on whether the content provider is considered high quality or highly unusual. Both of these characteristics appear

to encourage users to explore content more deeply instead of scanning content. One surprising development is that despite

German publishers lobbying for an opt-in law, none have chosen to opt-out (Lomas, 2013). Our paper provides an explanation

of such behavior—ultimately aggregators may benefit many newspapers, especially high-quality ones, and the purpose of the

opt-in provision may be to increase bargaining powerover payments to news providers rather than an actual desire by copyright

holders to opt-out of the aggregator.

More broadly, our study is related to prior work that describes how digital technologies affect search costs and generate

spillovers (Bakos, 1997; Ghose, Goldfarb,& Han, 2011; Greenstein, 2011; Shapiro & Varian, 1999). The novelty of our study is

that we are the first to explore how access to different types of digital content affects information gathered by consumers. Note

that the focus of our study is not how aggregators affect direct navigation to the content providers’ websites—Sandoval (2009),

Arrington (2010), and Athey and Mobius (2012) discuss this. Instead, we measure how a platform’s expansion or contraction

of content affects subsequent navigation by users.

Our results have implications for copyright policy regarding platforms that aggregate digital content. The digital revolution

challenges various aspects of copyright protection (Greenstein, Lerner, & Stern, 2011), but much of the focus has been on

peer-to-peer piracy rather than newer legal models of business that aggregate specific types of content. Online aggregators

in media assert that their practice is protected by copyright law because they only displaysmall extracts of information, and often

this information is factual (Isbell, 2010). Our empirical distinction between a scanning effect where the aggregator substitutes

for original content and a traffic effect where the aggregator is complementary, is useful for analyzing the potential policy

implications of such business models. The fact that we find evidence of a traffic effect, even with a relatively large amount

of content on an aggregator, is perhaps evidence that the “fair use” exemptions are less potentially damaging to the original

copyright holder than is often thought.

2INSTITUTIONAL SETTING

Google News is ranked as the fifth most visited news website by Hitwise. Receiving 2.90% of all news site visits, Google News

is the second most popular news aggregator service after Yahoo! News, which received 7.09% of all news site visits. Google

News electronically aggregates different newssources based upon a proprietar y algorithm. As of December 2009, Google News

claimed to receive news content from 25,000 publishers across the worldand to send one billion clicks to these publishers every

month (Cohen, 2009). Figure 1 provides a screenshot of Google News. Google News has two noticeable features that distinguish