Unveiling the Cost of Free: How an Ad-Sponsored Model Affects Serialized Digital Content Creation

Abstract

Within the field of serialized digital content, platforms have recently introduced the ad-sponsored model to provide free content and attract readers. Although this model potentially benefits readers by removing financial barriers, its impact on content creators remains unclear. Our study investigates the effects of the ad-sponsored model on the content creators’ productivity by leveraging a policy change on a leading web novel platform as a natural experiment. Our findings indicate a significant decline in content creators’ efforts in the ad-sponsored model, suggesting the potential adverse effects. Our results demonstrate that this decline is primarily due to reduced reader engagement, as readers may perceive lower “sunk costs” with free content compared with paid content. Our findings provide valuable insights for serialized digital content platforms adopting or considering the ad-sponsored model, emphasizing the importance of considering both creator and user dynamics when introducing new business models.