Programmatic or sponsored advertising? Control, costs, and consumer utility in platform competition

Digital platforms increasingly allow content producers to choose between programmatic advertising, controlled by the platform, and sponsored advertising, controlled by producers. While both formats coexist in practice, little is known about how the allocation of advertising control affects competition, content quality, and platform outcomes. We develop a game-theoretic model in which competing producers endogenously choose between these two advertising regimes. Programmatic advertising centralizes decision rights at the platform, whereas sponsored advertising decentralizes control but requires integration of advertising into content. We show that this governance difference fundamentally alters strategic incentives by jointly affecting consumer utility and production complexity. Our analysis reveals a non-monotonic relationship between consumer advertising aversion and equilibrium format adoption. Depending on advertising disutility, integration costs, and competitive substitutability, producers may adopt symmetric or asymmetric advertising strategies, and multiple equilibria may arise. Notably, higher advertising aversion can initially favor centralized programmatic control but may ultimately make sponsored advertising more attractive when its content-specific benefits dominate. These findings provide new theoretical insights into advertising governance in platform competition and clarify when decentralized advertising control enhances or reduces platform performance.