The Advertising in Online Video Platform: A Game Theory Analysis

With the continued growth of the online video platform market, finding an effective business model has become one of the main issues for video providers. This paper proposes an advertising incentive model to maximize video providers' revenue and investigate users' motivation to obtain premium services based on value differentiation and snob effects. Considering the impact of ad loss on advertisers, we establish the existence of an equilibrium in our proposed hybrid revenue model using a two-stage Stackelberg model. We find that more aggressive advertising incentives lead to an increase in the proportion of free users, and the threshold for free users to become paid users is closely related to the disutility of ads and the strength of advertising incentives. Experimental results show that video providers can use personalized recommendations to enhance user utility. When the advertising incentives are large enough, users should choose the free mode. This provides theoretical support for optimizing the revenue model of online video platforms.