Estimation of the indirect network effect: On the example of television advertising

Abstract

The platform is an intermediary between groups of users whose direct interaction without the platform would be complicated or unachievable. A distinctive feature of platform markets is the presence of indirect network effects (or cross‐platform effects), which consist of the fact that the demand of one group of users for platform services affects the demand of another group of users. In the presence of multidirectional network effects, an important platform’s business decision is to determine the optimal volume of services that create negative network effects, since after a certain amount of effects the company starts to lose users on the other side of the platform. For the business model to be successful and profitable, the platform should take this relationship into account. This study makes a quantitative assessment of cross‐ platform network effects using data from the Russian television market. The author of the study obtained statistically significant positive audience effect and negative advertising effect.