Content moderation and advertising in social media platforms

Abstract

On social media platforms, advertisers can be exposed to brand safety issues if they are associated with unsafe content. In this paper, we study the incentive of an ad-funded platform to curb the presence of unsafe content. Moderating unsafe content reduces the risk of advertiser presence on social media platforms, but it can change users’ participation on the platform and, in turn, affect advertisers’ monetization. This indirect “eyeball effect” can be either positive or negative and is key for the platform’s design of its content moderation policy. We identify conditions for the platform not to moderate unsafe content and demonstrate how the optimal moderation policy depends on the risk the advertisers face. We also study the intended and unintended effects of a policy that mandates social media platforms to moderate (more) unsafe content. We show that although it can benefit advertisers, users may be worse off because of the greater number of ads they are exposed to. Finally, we study how social media platform competition and the introduction of taxes on social media activity can distort the platform’s moderation strategies.

Keywords: Online advertising; Content Moderation; User-generated Content; Platforms; UGC.

JEL Classification: L82; L86; M3.