Free Digital Content Business Model: Value Creation Mechanisms and Sustainable Competitive Advantage

Digital media's rapid development has changed how content platforms create, promote, and monetize content. In China, the free content plus advertising model has become increasingly important in the digital content industry. This study uses Fanjie Free Novel from ByteDance as the case, combining zero-price effect and two-sided market theory to analyze the value creation mechanism, structural challenges, and sustainability problems of free digital content business models. The study finds that a free business model can lower the entry barrier for users and rapidly scale the market, and a two-sided market model can help the platform turn users' attention into revenue through advertising. At the same time, large-scale behavior data can support content discovery, recommendation, and cross-media IP development. However, this model also faces three major challenges: conflicts among lower user commitment, advertising intensity, and user experience. And how creator incentives guided by immediate traffic will affect long-term content quality. To address these challenges, the study suggests a more flexible freemium model, dynamic advertising governance, and a redesigned creator incentive system. These strategies aim to help digital content platforms strike a more stable balance among user growth, monetization, creator incentives, and sustainable competitive advantage.