Skippable Ads : Interactive Advertising on Digital Media Platforms

The skippable ad format, commonly used by online content platforms, gives a viewer the option to skip part of an advertisement after seeing some limited information, and jump directly to her desired content. It also enables these platforms to charge advertisers only when viewers attend to the entire ad. We develop a dynamic model of a viewer receiving incremental information from the advertiser and embed it in a two-sided market setting with an advertising market. Our results show that skippable ads can be less effective overall in converting existing viewers to advertisers. However, skippable ads bring more viewers to the platform and, in turn, induce more advertisers. Our results suggest that a switch to the skippable format is a profitable strategy for growing platforms, but not necessarily for platforms in saturated markets