본문 내용으로 건더뛰기

KDI 경제정보센터

ENG
  • 경제배움
  • Economic

    Information

    and Education

    Center

최신자료
Online Business Models, Digital Ads, and User Welfare
NBER
2024.10.10
We present a model where social media platforms offer plans that intermix entertaining content with digital advertising (“ads”). Users derive utility from entertainment and learn about their valuation for a product from ads. While some users are fully rational, others na?vely perceive digital ads as more informative than they actually are. We characterize the profit-maximizing business model of the platform and show that welfare is lower when the platform monetizes through advertising instead of subscription both for na?fs (because they are targeted by intense digital advertising, which makes them over-optimistic about product quality and over-purchase the product) and for sophisticates (because the inflated demand from na?fs increases the firm’s price). This negative welfare effect is intensified when the platform can offer mixed business models that separate the na?ve and sophisticated users into different plans. Our results are robust to firm-level and platform-level competition, because digital ads soften competition between both firms and platforms. We also show how digital ad taxes can improve welfare.