An analysis of operating strategy for a video live streaming platform: advertisement, advertorial, and donation.

Abstract

Video live streaming services have reached every corner of the world through the influence of COVID-19. In this study, the business model of a video live streaming platform is examined under a structure in which both a streamer and a platform provider simultaneously have an incentive alignment and a payoff conflict. On the one hand, the streaming platform relies on the efforts of streamers to strengthen its market share; on the other hand, streamers can employ influencer marketing to construct their own additional revenue from commercials, which can affect the sales from the advertisements operated by the platform. In addition, the platform provider can reward talented streamers for their remarkable performance by sharing the subscription revenue with them; however, the adoption of a built-in reward system is perplexing because the platform can levy a commission fee from the money donated to streamers. Combining these practical points, our results indicate that advertorials can still be largely expanded by streamers mastering marketing skills, even if there is high substitution in ad services. In addition, the practice of charging a commission fee from the built-in reward system but sharing the subscription revenue with outstanding streamers can benefit the streaming platform, and their donation loss will be compensated by a higher revenue-sharing ratio.