A Comparative Analysis of Pure and Shoppable Ads on Social Media Platforms

Social media platforms increasingly use shoppable ads, blending e-commerce with traditional ads, yet it remains unclear if these ads are more profitable than pure ads. Our study compares the profit, pricing, and ad volume between pure and shoppable ads, considering factors like commission rates and user preferences. We find that shoppable ads can yield higher profits, even when users prefer pure ads or when product value is low. Interestingly, platforms might still price pure ads lower or display more of them, especially when their market size is larger or user aversion crosses a threshold. These insights guide platforms in optimizing ad revenue and pricing strategies.