An Economic Analysis of Two-Sided Market Strategy Under the Threat of Advertisement De-Embedding Service by a Third Party
Recently third parties provide advertisement-removal services for digital contents, threatening the two-sided market business model of copyright holders. This paper suggests a modified version of the two-sided market model that allows a third party to actively de-embed advertisements from the copyright holder’s contents. Analysis shows both the third party and the copyright holder may coexist even if the third party completely de-embeds the advertisements, as long as only some users are indifferent to advertisements. When there are no advertisement indifferent content users, there is an optimal degree of de-embedding for the third party, balancing the survival of the two sided market model and the third party’s profit. Efficiency of detecting the use of de-embedding services and social welfare under different third party objectives are also analyzed. This paper provides practical implications for copyright holders who are under the threat of advertisement de-embedding services