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Chinese Journal of Management Science ›› 2021, Vol. 29 ›› Issue (7): 202-213.doi: 10.16381/j.cnki.issn1003-207x.2018.0517

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Free or Subscription? Exploring the Optimal Online Content Revenue Model with Considering Advertisement Quality

ZHOU Yan-ju1, SHEN Zhen1, YING Ren-ren2   

  1. 1. School of Business, Central South University, Changsha 410083, China;
    2. Jiangxi Modern Polytechnic College, Nanchang 330095, China
  • Received:2018-04-16 Revised:2018-09-07 Online:2021-07-20 Published:2021-07-23

Abstract: Exploring revenue model for online content providers is always a key theoretical and practical issue. However, the impacts of content quality or advertisement quality are ignored in most existing decision models. Thus, how to choice the optimal revenue model between free model and subscription model for the online content provider is analyzed in this paper, who has an online content item and an advertiser aiming to embed an native advertisement in this content. But the advertiser may have private advertisement quality information. To solve it, user stickiness, advertisement quality and its asymmetric information are taken into account, and applies principal-agent theory to establish different game models for the provider adopting free model and subscription model, respectively, in information complete, information asymmetry as well as ad-free cases. Through making the optimal decisions on content quality and/or advertising price, and designing contracts to motivate the advertiser to tell the truth, all equilibrium results are achieved and analyzed. It is indicated that:(1) Advertisement especially high-quality advertisement can be employed to realize the system's Pareto improvement and make subscription model more available. (2)The benefits the provider and social welfare get from advertising will be reduced by advertisement information asymmetry. And the higher quality an advertisement is, the more valuable its quality information for the provider. (3) Subscription model doesn't always perform better than free model. Under same conditions, it is wise for an online content provider to provide fewer but better subscription content, or make more extensive and general free content to make corresponding revenue model more profitable. Those findings can provide certain decision supports and implications for the online content provider's revenue model selection and related decisions in reality.

Key words: free model, subscription model, online content quality, online advertising pricing, advertisement quality information asymmetry

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