User-Generated Content Platforms: Managing the Relationship Triangle

42 Pages Posted: 7 Jun 2023 Last revised: 19 Mar 2024

See all articles by Ruize Ma

Ruize Ma

Dalian University of Technology - School of Economics and Management

Yunke Mai

University of Kentucky - Gatton College of Business and Economics

Bin Hu

University of Texas at Dallas - Department of Information Systems & Operations Management

Date Written: March 12, 2024

Abstract

Problem definition: In the user-generated content (UGC) business model, the platform provides incomes for the creators, the creators provide contents for the viewers, and the viewers provide advertising revenue to the platform, forming a relationship triangle. We set out to study a UGC platform’s optimal dynamic operational policies in its different stages and the impact of various constraints and innovations. Methodology/results: We adopt a hybrid of the Bass diffusion model and the replicator equation in evolutionary game theory to study the dynamic operational decisions of UGC platforms, including promotion, advertising, and revenue sharing. We find an interesting mirroring structure between the platform’s early- and mature-stage optimal advertising and creator wage policies. An analysis of the optimal policies reveals a coherent rationale behind the dynamic management of the UGC platform around the relationship triangle. We also show that the platform should generously share advertising revenue with creators, and in fact may adopt loss leading at or shortly after its launch. We further explore several UGC constraints and innovations, including liquidity constraints, paid advertising removal, sponsored contents and viewer tipping. Managerial implications: Our findings are instructive for the dynamic management of UGC platforms and highlight the unique characteristics of this business model.

Suggested Citation

Ma, Ruize and Mai, Yunke and Hu, Bin, User-Generated Content Platforms: Managing the Relationship Triangle (March 12, 2024). Available at SSRN: https://ssrn.com/abstract=4471222 or http://dx.doi.org/10.2139/ssrn.4471222

Ruize Ma

Dalian University of Technology - School of Economics and Management

Yunke Mai

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

Bin Hu (Contact Author)

University of Texas at Dallas - Department of Information Systems & Operations Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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