Advertising or Brokerage Model for Social Platforms With a Commerce Feature

26 Pages Posted: 6 Apr 2020

See all articles by Guofang Nan

Guofang Nan

Tianjin University; Tianjin University - College of Management and Economics

Chenyu Chu

affiliation not provided to SSRN

Zhiyong Li

State Key Laboratory of Media Convergence and Communication; School of Economics and Management, Communication University of China

Minqiang Li

Tianjin University - College of Management and Economics

Date Written: February 17, 2020

Abstract

This study analyzes the business model decision of social platforms with a commerce feature. In practice, social platforms can adopt either an advertising model or a brokerage model. We develop a game-theoretic model to recommend the better business model and investigate the effect of social factors on strategy choice. We find that several factors, including the network effects between advertisers and consumers, the basic value of the commerce feature, and the social value, affect the business model decision. Specifically, when the ratio between the network effects of advertisers and consumers is large enough, meanwhile the commerce feature’s basic value and the social value are both at an intermediate level, the advertising model is optimal. Otherwise, the brokerage model is optimal. Interestingly, when the intrinsic value of products is adequately large, the social platform’s profit decreases with the commerce feature’s basic value. Finally, given an increase in the commerce feature’s basic value, when the intrinsic value of the products is in different ranges, the profit and the social platform decision may show different trends.

Keywords: Social Platform, Commerce Feature, Advertising, Brokerage, Two-Sided Market

Suggested Citation

Nan, Guofang and Nan, Guofang and Chu, Chenyu and Li, Zhiyong and Li, Minqiang, Advertising or Brokerage Model for Social Platforms With a Commerce Feature (February 17, 2020). Available at SSRN: https://ssrn.com/abstract=3539523 or http://dx.doi.org/10.2139/ssrn.3539523

Guofang Nan

Tianjin University ( email )

92, Weijin Road
Nankai District
Tianjin, Tianjin 300072
China

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

Chenyu Chu

affiliation not provided to SSRN

Zhiyong Li (Contact Author)

State Key Laboratory of Media Convergence and Communication ( email )

No.1 Dingfuzhuang East Street Chaoyang District
Beijing, 100024
China

School of Economics and Management, Communication University of China ( email )

No.1 Dingfuzhuang East Street Chaoyang District
Beijing, 100024
China

Minqiang Li

Tianjin University - College of Management and Economics ( email )

NO.92 Weijin Road
Nankai District
Tianjin, 300072
China

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