Advertising and Content Creation on Digital Content Platforms

This paper investigates the interplay between advertising and decentralized content creation on digital content platforms, such as YouTube, TikTok, and Instagram. Unlike traditional media, content on these platforms is produced by numerous creators competing for viewer attention. This study addresses how a platform's advertising policy (specifically, the level of advertising embedded in organic content) and various market factors, including viewers' satiation rates and their distaste for ads, influence decentralized content creation, exploring the ensuing implications for the platform's advertising and revenue-sharing policy design. Using a game-theoretical model, the research reveals that the level of advertising, viewers' satiation rates, and their distaste for ads can have a nonmonotonic impact on the equilibrium content quality. Contrary to conventional wisdom, a low level of advertising could be advantageous for platforms when viewers are inclined to consume high volumes of content, factoring in the strategic influence on content creation. Additionally, revenue sharing with creators depends on factors such as the viewers' satiation rates and the creators' creative costs. This study offers content platforms strategic guidance on refining their advertising and revenue-sharing policies in the creator economy.