Skippable Ads: Interactive Advertising on Digital Media Platforms
45 Pages Posted: 15 May 2018 Last revised: 8 Sep 2021
Date Written: August 3, 2021
Digital media platforms commonly use the skippable ad format, which gives a viewer the option to skip part of an advertisement after seeing some limited information, and jump directly to the desired content. It also enables these platforms to charge advertisers only when viewers attend to the entire ad. We develop a dynamic model of a viewer receiving incremental information from the advertiser and embed it in a two-sided market setting with an advertising market. Our results show that skippable ads can be less effective overall in converting existing viewers to advertisers. However, skippable ads bring more viewers to the platform and, in turn, induce more advertisers. This suggests that a switch to the skippable format is a profitable strategy for an emerging and growing platform, but not necessarily for one in a saturated market.
Keywords: Advertising, Commercial Media, Two-Sided Markets, Skippable Ads
JEL Classification: L12, L82, M37
Suggested Citation: Suggested Citation