3 ms·

$12 a year is misleading. Paying users are much more valuable ad targets than free users once you start segmenting them. So now you need to charge significantl

$12 a year is misleading. Paying users are much more valuable ad targets than free users once you start segmenting them. So now you need to charge significantly more than $12 to make up for that. The higher price makes the paid users even more valuable to advertisers. Eventually the service slips in a few ads because it’s just too much money to leave on the table. Cable TV started as an ad free subscription service. I’m not saying it can’t work, but historically most subscription services don’t stay ad free forever.

michaelchisari 5y ago
most subscription services don’t stay ad free forever. This is true, for two reasons: Declining profit as markets mature and the need for investors to see greater returns YOY. Eventually, all companies turn to more intense methods of profit extraction. This isn't specific to digital services of course, we're seeing the effects of this broadly across the economy. One way to put off the inevitable (for potentially quite some time) would be to bootstrap instead of taking investment. Easier said than done, of course, but maybe not impossible since the hardest part may be breaking open the market in the first place and it might be a lot easier to build an alternative app in a mature space than it was to create Instagram in 2010.
tshaddox 5y ago
This is extremely important, and something I think many people don't realize. Charging a fee might make it possible for a company to be profitable without needing ad revenue, but it likely won't change the underlying economics such that also showing ads won't be even more profitable. The only ways around this that I can see are 1) a company steadfastly choosing to forgo the ad revenue, 2) a company maintaining a customer base that is willing to pay the subscription fee and has a principled opposition to ads such that introducing ads wouldn't be viable, or 3) somehow reorganizing the economy such that the negative externalities of advertising are greatly reduced.
- DaiPlusPlus 5y ago
  > somehow reorganizing the economy such that the negative externalities of advertising are greatly reduced. What “negative externalities” are you referring to?
  - tshaddox 5y ago
    Some simple and direct ones to start with: bandwidth and CPU usage, blatant malware, annoyance.
    - DaiPlusPlus 5y ago
      Strictly speaking, I don't think those are "externalities" though
SirSourdough 5y ago
This reminds me of the NYT banner ad prompting subscribers to allow ads on articles. $35/month and ads? Yeah, no.

michaelchisari 5y ago

most subscription services don’t stay ad free forever. This is true, for two reasons: Declining profit as markets mature and the need for investors to see greater returns YOY. Eventually, all companies turn to more intense methods of profit extraction. This isn't specific to digital services of course, we're seeing the effects of this broadly across the economy. One way to put off the inevitable (for potentially quite some time) would be to bootstrap instead of taking investment. Easier said than done, of course, but maybe not impossible since the hardest part may be breaking open the market in the first place and it might be a lot easier to build an alternative app in a mature space than it was to create Instagram in 2010.

tshaddox 5y ago

This is extremely important, and something I think many people don't realize. Charging a fee might make it possible for a company to be profitable without needing ad revenue, but it likely won't change the underlying economics such that also showing ads won't be even more profitable. The only ways around this that I can see are 1) a company steadfastly choosing to forgo the ad revenue, 2) a company maintaining a customer base that is willing to pay the subscription fee and has a principled opposition to ads such that introducing ads wouldn't be viable, or 3) somehow reorganizing the economy such that the negative externalities of advertising are greatly reduced.

DaiPlusPlus 5y ago
> somehow reorganizing the economy such that the negative externalities of advertising are greatly reduced. What “negative externalities” are you referring to?
- tshaddox 5y ago
  Some simple and direct ones to start with: bandwidth and CPU usage, blatant malware, annoyance.
  - DaiPlusPlus 5y ago
    Strictly speaking, I don't think those are "externalities" though

SirSourdough 5y ago

This reminds me of the NYT banner ad prompting subscribers to allow ads on articles. $35/month and ads? Yeah, no.