Advertising and Content Differentiation: Evidence from YouTube

Abstract

Does advertising revenue increase or diminish content differentiation in media markets? This paper shows that an increase in the technically feasible number of ad breaks per video leads to an increase in content differentiation between several thousand YouTube channels. I exploit two institutional features of YouTube's monetization policy to identify the causal effect of advertising on the YouTubers' content choice. The analysis of around one million YouTube videos shows that advertising leads to a twenty percentage point reduction in the YouTubers' probability to duplicate popular content, i.e., content in high demand by the audience. I also provide evidence of the economic mechanism behind the result: popular content is covered by many competing YouTubers; hence, viewers who perceive advertising as a nuisance could easily switch to a competitor if a YouTuber increased her number of ad breaks per video. This is less likely, however, when the YouTuber differentiates her content from her competitors.

Platform Partnership Programs and Content Supply: Evidence from the Youtube “Adpocalypse”

“…This is consistent with early studies noting that advertising creates an incentive to shift production towards popular content in an effort to maximize "eyeballs" (Steiner, 1952;Wilbur, 2008), which leads to a duplication of mainstream at the expense of niche content (Anderson and Gabszewicz, 2006). Second and in contrast, Kerkhof (2022) finds that an increase in the amount of advertising that creators on YouTube include in their videos decreases their tendency to duplicate mainstream content. This is attributed to increased competitive pressure in this market segment.…”

The Effect of Car Sales E-Commerce Platform on New Car Buying Decisions Mediated by Digital Advertising Media and Youtube Media

“…does not yet have a strong enough function to mediate and influence the occurrence of purchasing decisions, Youtube media has another function as advertising value in introducing products or services (Kerkhof, 2021). Youtube media is effective when it has a positive influence on the creation of brand awareness and brand image of a product or service (Aqsa et al, 2020), but it is different from when someone makes a purchase decision.…”

“…A major contribution to its success comes from its users who distinguish it from traditional content broadcasters (Wattenhofer, M., Wattenhofer, R., & Zhu, 2012). According to (Kerkhof, 2021) Youtube is part of the Social Networking Services (SNSs) that provide and host a web space for communities and people to build their personal pages for free to upload and watch videos. These social networks are people-oriented but are increasingly being used for commercial purposes as well.…”

“…Social media is a digital marketing tool and can help strengthen the brand of a product (Amitay et al, 2020) (Wahyoedi et al, 2021), promotional strategies have an important significance in determining the final purchase decision (Amitay et al, 2020). Before making a purchase decision, consumers seek advice on social media, and Youtube has become a product search platform by consumers before making a purchase decision (Kerkhof, 2021), purchasing decisions are influenced by product reviews by media activists on Youtube and Instagram (Nandagiri & Philip, 2018). Youtube content can provide accurate purchases and reduce the risk of purchasing decisions (Kerkhof, 2021).…”

“…Before making a purchase decision, consumers seek advice on social media, and Youtube has become a product search platform by consumers before making a purchase decision (Kerkhof, 2021), purchasing decisions are influenced by product reviews by media activists on Youtube and Instagram (Nandagiri & Philip, 2018). Youtube content can provide accurate purchases and reduce the risk of purchasing decisions (Kerkhof, 2021). The growth of the middle class and the growth of the automotive industry, triggering the development and emergence of digital automotive platforms (Putri Patty et al, 2021) and also changes in consumer behavior in buying cars (Walton, 2019).…”