Helping Oneself by Helping a Rival: Social-Media Platforms’ Policies on Enabling Features for Influencers

Social-media platforms and influencers are often seen as collaborators. However, both rely primarily on advertising services, introducing a competitive dimension to their relationship. As the dominant players in this relationship, platforms have used design features, which they control, to manage this dynamic. Some platforms have adopted an antagonistic approach by disabling certain features (e.g., clickable shopping-related hyperlinks) for influencers, while others take a more cooperative stance, allowing influencers to use these features for free or for a fee. We develop a game-theoretic model to explore the competition between the two parties and study the platform’s decision to enable or disable a feature that enhances the effectiveness of an influencer’s service. We show that even when the platform cannot charge the influencers for using the feature, it can still benefit if the advertisers’ valuation of the platform’s service is not significantly lower than that of the influencer’s service. While enabling the feature may result in a loss of market share, the platform can potentially offset this loss by raising its prices. A win–win situation for the platform and the influencer may come at the expense of some advertisers, suggesting the platform’s helping the influencer can lead to a “collusive” outcome, despite the competition for advertisers. If the platform can charge a fee for using the feature, it should always enable the feature at an appropriate fee, as this will benefit the platform. The additional fee revenue may come with no change in the platform’s advertising revenue, with an increase in the advertising revenue, or at the expense of some advertising revenue. The platform strategically uses the fee to influence the influencer’s service offering, which affects the platform’s revenue mix under the new business model.