User reward programs in online social media

Online social media (OSMs) have become a popular and growing Internet phenomenon, as exemplified by the millions of followers of websites like YouTube, Twitter, and Facebook. Given the Internet’s ease of access and the high degree of competition to attract users to these sites, a question arises as to whether OSMs should develop revenue-sharing programs as a way to reward their contributing users. We present an ex ante asymmetric duopoly OSM game, where heterogeneous users are either active or passive with respect to each OSM. The game includes two steps: First, the OSMs simultaneously announce their rewards for active users; and second, based on their preference, users choose their level of contribution with respect to each OSM. We show that this game has a unique Nash equilibrium in pure strategies, and we identify the conditions under which a symmetric equilibrium exists, despite the asymmetry between the OSMs. Moreover, at equilibrium, no user chooses to contribute content exclusively to the less favourable OSM, even when the more favourable firm shares a lower reward than the less favourable firm. Furthermore, in some circumstances, a higher asymmetry can diminish the net revenue of the more favourable firm and vice versa.