Ad revenues provide strong monetary incentives to content creators, but some of their content is controversial and may produce harmful side effects. This paper investigates whether platforms can use demonetization as a strategy to mitigate the creation of and interaction with controversial content. Firstly, we examine if demonetization discourages the creation of controversial content by diminishing the financial incentives associated with ad revenues. Secondly, we examine if demonetization reduces users' interactions with controversial content. For identification we employ a Difference-in-Differences framework, taking advantage of YouTube's demonetization of controversial content as a natural shock. We find that affected creators significantly decrease their content creation, specifica...[ Read more ]

Ad revenues provide strong monetary incentives to content creators, but some of their content is controversial and may produce harmful side effects. This paper investigates whether platforms can use demonetization as a strategy to mitigate the creation of and interaction with controversial content. Firstly, we examine if demonetization discourages the creation of controversial content by diminishing the financial incentives associated with ad revenues. Secondly, we examine if demonetization reduces users' interactions with controversial content. For identification we employ a Difference-in-Differences framework, taking advantage of YouTube's demonetization of controversial content as a natural shock. We find that affected creators significantly decrease their content creation, specifically controversial content. On the other hand, users significantly reduce their interactions with controversial content, but increase their interactions with uncontroversial content more than proportionally. We find no evidence supporting the claims that demonetization leads to increasing creator or user churn rates. These findings suggest that demonetization has the potential to moderate content creators' and users' behaviors effectively without incurring significant costs to platform owners.

Keywords: Platform Governance; Complementors; Media Platforms.