Free vs. For a Fee: The Impact of Information Pricing Strategy on the Pattern and Effectiveness of Word-of-Mouth via Social Media Completed Research Paper
Authors: Oh, Hyelim; Animesh, Animesh; Pinsonneault, Alain
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With the new realities of the digital age, print newspapers are experimenting with different pricing models for their online content. Using NYT鈥檚 paywall rollout as a natural experiment, our study finds that a firm鈥檚 information pricing policy influences the pattern and effectiveness of online word of mouth (WOM) in social media. Using difference-in-difference-indifferences analysis, we find that implementing a paywall (i.e., charging for the content which was earlier available for free) has a disproportionate impact on WOM for popular and niche articles, creating a longer tail in the content sharing distribution. Further, we find that the impact of WOM on NYT鈥檚 website traffic weakens significantly after the introduction of NYT鈥檚 paywall. These results show that information pricing strategy has implications for product and promotion strategies. The study offers novel and important implications for the theory and practice of strategic use of social media and information pricing strategy.