User-Generated Content, Strategic Moderation, and Advertising
38 Pages Posted: 2 Apr 2020
Date Written: March 9, 2020
Social networks act as "attention brokers'' and stimulate the production of user-generated content to increase user activity on a platform. When ads are displayed in unsuitable environments (e.g., disputed material), advertisers may face a backlash. This article studies the incentive for an ad-funded platform to invest in content moderation. We present several results. Firstly, there is a U-shaped relation between ad prices and brand safety: the highest ad price arises for full or no content moderation. Secondly, content moderation decreases when platform competition intensifies and this configures a market failure. We show that these results provide important implications for platform regulation and highlight that well-intended policy measures might lead to the spread of harmful content.
Keywords: Online advertising; Content Moderation; User-generated Content; Platforms; UGC.
JEL Classification: L82; L86; M3.
Suggested Citation: Suggested Citation