Social Attention and the Provider's Dilemma

TL;DR

This paper models how content providers can optimize revenue strategies considering user adaptation to inconveniences like ads or fees, revealing conditions under which gradual or immediate changes are optimal.

Contribution

It introduces a theoretical framework based on adaptation theory to analyze the tradeoffs in revenue strategies for content providers facing user retention challenges.

Findings

Log-concave continuation likelihood favors gradual changes.

Log-convex continuation likelihood favors immediate changes.

Provides guidelines for optimal revenue-increasing strategies.

Abstract

While attracting attention is one of the prime goals of content providers, the conversion of that attention into revenue is by no means obvious. Given that most users expect to consume web content for free, a provider with an established audience faces a dilemma. Since the introduction of advertisements or subscription fees will be construed by users as an inconvenience which may lead them to stop using the site, what should the provider do in order to maximize revenues? We address this question through the lens of adaptation theory, which states that even though a change affects a person's utility initially, as time goes on people tend to adapt and become less aware of past changes. We establish that if the likelihood of continuing to attend to the provider after an increase in inconvenience is log-concave in the magnitude of the increase, then the provider faces a tradeoff between achieving a higher revenue per user sooner and maximizing the number of users in the long term. On the other hand, if the likelihood of continuing to attend to the provider after an increase in inconvenience is log-convex, then it is always optimal for the provider to perform the increase in one step.