Advertising and Content Differentiation: Evidence from YouTube.

This article investigates how an exogenous increase in the feasible amount of advertising affects content differentiation among YouTubers on YouTube, the world's second-most visited website. Exploiting YouTube's "ten-minute trick" and the launch of a new ad break tool in November 2015, the study uses data from over 15,000 German YouTubers and more than one million videos to show that allowing more ad breaks per video leads YouTubers to reduce their production of mainstream content by about 20 percentage points, instead shifting toward niche content to soften competition in advertising "price." The effect is strongest among YouTubers with at least 1,000 subscribers and varies across video categories, supporting the interpretation that competitive pressure drives content differentiation. These findings contribute causal evidence to debates on advertising's role in media markets, suggesting that increased advertising opportunities can enhance content diversity rather than concentrating on mainstream offerings.