Abstract: In recent years, online video has become an important part of online content consumption, and its diffusion is significantly affected by online word of mouth (WOM). Considering the impact of online WOM on the diffusion process of online videos during the premium period, the optimal decisions of the online video operator on video price and advertising volume are studied, and how the WOM attributes, free trial, video quality and premium period affect the optimal decision results is analyzed. Results show that when the experience quality of the subscribers is sufficiently higher than that of the non-subscribers, the operator chooses the advertising-oriented strategy (with advertising level relatively higher than pricing level); otherwise, the operator chooses the payment-oriented strategy (with pricing level relatively higher than advertising level). The operator is more likely to choose the payment-oriented strategy when the video is with better WOM attributes, when the free-trial time is shorter, when the premium content is with lower quality, or when the free content is with higher quality. Based on the above optimal decision results, the operator can further improve the premium period according to the video’s WOM attributes.This study contributes to the literature at the intersection of innovation diffusion and online content marketing.

Key words: online video, online word of mouth, optimal pricing, advertising, Bass model