User-Generated Content Platforms: Managing the Relationship Triangle
Prof. Bin Hu
Professor, Operations Management
Naveen Jindal School of Management
University of Texas at Dallas
A typical user-generated content (UGC) platform operates as an ecosystem: the platform provides incomes for the creators, the creators provide contents for the viewers, and the viewers provide advertising revenue to the platform, forming a relationship triangle. Managing a UGC platform is a delicate and dynamic balancing act around the relationship triangle. We adopt the continuous-time optimal-control framework to study the dynamic operational decisions of UGC platforms, including promotion, advertising, and revenue sharing. We find that, in a UGC platform’s earliest stages, it can maximize advertising revenue without worrying about stifling the viewer base growth, then gradually shift to balancing growth and profitability, until reverting back to maximizing revenue when the viewer base becomes saturated. This pattern is a result of the unique relationship triangle in UGC platforms and contrasts with the common wisdom about managing ad-supported free services. We further show that these insights are robust under liquidity constraints and allowing paid advertisement removal, and that sponsored contents do not fundamentally change the insights but offer surprising flexibilities in UGC business model implementations.
Dr. Bin Hu is Professor of Operations Management in the Naveen Jindal School of Management at the University of Texas at Dallas. He received a PhD degree in Business Administration from the University of Michigan in 2011, and a BS degree in Mathematics from Peking University in 2005. Before joining UT Dallas in 2018, he taught at the University of North Carolina at Chapel Hill. Dr. Hu’s research interest is in supply chain management, procurement and sourcing, and innovative operations, and primarily employs analytical economic, game-theoretic, and optimization models in his research. He currently serves as Associate Editor for Management Science and Naval Research Logistics, and Senior Editor for Production and Operations Management.
