Advertising content and centralized operations in online platforms : reselling or agency selling

Abstract

User-generated content (UGC) platforms have been rapidly growing recently, and are drawing more attention from advertisers. This paper considers that many content creators sell their advertising contents, competing in price and quality, via a platform to advertisers. In addition, the platform can decide whether to take centralized operations, which will reduce all creators’ high-quality production cost. We consider two commonly observed selling formats, the reselling whereby the platform buys contents from creators and sells to advertisers, and the agency selling where creators sell directly to advertisers and platform collects commission per transaction. The equilibriums are characterized under these models and show that selling format will affect the provision of centralized operations. Then we further find some important difference between reselling and agency selling. First, platform’s centralized operations in the equilibrium always achieve a win-win-win situation under reselling, but not always under agency selling. Second, total profits of platform and creators under agency selling may be less than reselling, due to quality improvement effect and operations improvement effect. Third, platform’s centralized operations will bring more benefits to the total channel under agency selling than under reselling, if creators produce low-quality content without centralized operations under agency selling. Keywords: Advertising Content; Centralized Operations; Agency Model; Reselling Model

Date of Award	2024
Original language	English
Awarding Institution	The Hong Kong University of Science and Technology
Supervisor	Lijian LU (Supervisor)