Content provision strategy selection for a media platform in the presence of traffic revenue

Abstract

Inspired by the diversity of content provision and the importance of traffic revenue in media market, this paper investigates the pricing and advertising decisions for a media platform considering traffic revenue under three content provision strategies: single paid-content-without-ads strategy, single free-content-with-ads strategy, and hybrid content strategy. The optimal solutions among different content provision strategies are compared and analyzed, thereby guiding the media platform and consumers in choosing the best content provision mode, while also providing some valuable insights for the media platform in its decision-making. In presence of traffic revenue, findings show that the hybrid content provision strategy can achieve a win–win situation for the media platform and consumers, in terms of platform profit, consumer surplus, and decision-making speed, whereas the single paid or free content provision strategy cannot achieve such a situation. We also surprisingly find that the media content with higher quality fails in creating more welfare for consumers, when the traffic revenue sensitivity coefficient and the free content’s quality discount factor are high. Numerical experiments verify the theoretical results. We also study two model extensions of endogenous content quality and platforms competition, and find that the major findings of the base model are robust.