Advertising Reader Revenue
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Publishers try to use ad annoyance to lure subscribers

Digiday has reported this week that publishers hunting for subscribers are starting to offer services with ‘no mobile ads’.

It continues by giving the examples of Salon Media Group and Gannett who have all begun offering ad-free versions of their mobile apps to subscribers. Citing Gannett’s USA Today app users, Digiday states that the title is offering an ads-free experience as a standalone service for just $2.99 per month. For Salon, an ads-free experience is bundled into a pricier, premium offering which also provides access to a library of rich media content.

Whilst selling an ad-free experience is one route to appeal to people who block ads, it runs the danger of cutting off revenue from a super-engaged segment of a publisher’s audience. In addition, developing new ad experiences for a small subset of users is tricky because many publishers don’t have the subscriber scale.

In short, it’s a risky strategy, especially if publishers overload their sites with ads in a bid to push readers into buying an ad-free subscription.

The dilemma was thrown into sharp relief by a study from Pandora released last month. The internet radio service found whilst that too many ads can motivate users to pay for an ad-free version, it can push many more to listen less or abandon the service. The study found that the additional subscription revenue does not make up for the lost ad revenue from those who listen less or leave the service.

Commenting on the study, Mark Mahaney, senior tech analyst at RBC Capital, told Wired that a subscription model for streaming services is more attractive than an ad-supported model, but only slightly. “If you were to pick one versus the other, you’d probably pick a subscription model,” he said. “The ideal solution may well be to have both.” Having assumed the market would rapidly swing toward subscriptions, he’s been surprised by how many people are willing to tolerate ads for a free streaming product. “We have seen a shift, but it’s not been a dramatic, huge shift in preference. There’s still a very large percentage of people that prefer a free, ad-supported service.”