Unveiling the Cost of Free: How an Ad-Sponsored Model Affects Serialized Digital Content Creation

The selection of a business model significantly impacts the success of digital content platforms, influencing both consumers and creators. Within the field of serialized digital content, establishing incentives that align with creators’ interests poses a notable challenge. Web novel platforms, which allow writers to produce and market their work online, have traditionally adopted a pay-per-view model, where readers pay for access to content. However, a recent trend has seen the introduction of an ad-sponsored model, aimed at attracting readers with free content. Although the ad-sponsored model expands reader accessibility, its effects on writers remain uncertain. Our study investigates the impacts of the ad-sponsored model on writers’ content creation efforts, leveraging a policy change within a leading web novel platform as a natural experiment. Our results indicate a general decrease in writers’ productivity under the ad-sponsored model. To uncover the underlying mechanism, we focus on the role of reader engagement and conduct a mediation analysis. Our results demonstrate that the ad-sponsored model is associated with less reader engagement, which leads to a subsequent decrease in writers’ content creation efforts. Further, we conduct a reader-level analysis and find a significant decline in engagement with writers among those who consume ad-sponsored content, providing additional evidence supporting our main findings. These results substantiate our hypothesis that diminished reader engagement stems from a perception of reduced “sunk costs” associated with free, ad-sponsored content compared with paid books. From a psychological standpoint, the sunk costs inherent in paid content motivate continued reader engagement and interaction with writers, whereas ad-sponsored reading removes such costs, thereby decreasing reader engagement. This study holds profound implications for digital content platforms, underscoring the necessity for platform managers to carefully evaluate the impacts of implementing the ad-sponsored model on both creators and consumers of serialized digital content.