Social Media Advertising Loads as Prices

George Beknazar-Yuzbashev, Rafael Jimenez-Duran, Andrey Simonov and Mateusz Mateusz Stalinsk
Additional contact information
George Beknazar-Yuzbashev: University of Chicago,
Rafael Jimenez-Duran: Bocconi University, IGIER, Stigler Center, CESifo, and CEPR
Andrey Simonov: Columbia University and CEPR
Mateusz Mateusz Stalinsk: University of Warwick and CAGE

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Most digital platforms are funded through advertising rather than direct payments. Why? We argue that three main factors could explain this prevalence: users are more sensitive to monetary prices than to ad loads, microtargeting improves the match quality between users and ads, and platforms can personalize ad loads and thus price discriminate. We conduct a field experiment on Facebook with 1,810 users who install a browser extension that (i) hides nearly all ads or (ii) replaces microtargeted ads with untargeted ones. We find that hiding 82% of ads increases time on the platform by only 6%, showing that users are highly insensitive to ad loads. Removing targeting sharply reduces ad clicks and long-run engagement, indicating that targeting increases the match quality between users and ads. Finally, two-thirds of ad-load variation occurs across users, consistent with ad-load discrimination. Counterfactual simulations indicate that an ad-funded model performs at least as well as a subscription model i terms of profits and delivers higher consumer surplus. The key mechanism is that users are much less sensitive to ad loads than to monetary prices, making advertising a relatively efficient revenue source.

Keywords: social media platforms; online advertisement; user engagement; field experiment (search for similar items in EconPapers)
Date: 2026
New Economics Papers: this item is included in nep-com, nep-exp and nep-mkt
References: Add references at CitEc
Citations:

Downloads: (external link)
https://warwick.ac.uk/fac/soc/economics/research/w ... p_1602-stalinski.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:1602

Access Statistics for this paper

More papers in The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Margaret Nash ().