The battle of revenue: Advertising vs. subscriptions
It’s an existential imperative: publishing needs to remain profitable. In the middle of what The New York Times refers to as a “sector-wide slump,” publishers are examining various approaches to growing revenue.
However, even though the situation is complex, the outlook is anything but dire. The potential for revenue is out there; the future looks bright.
Digital publishing revenue in the US is growing and expected to amount to over 27 billion dollars by 2027, representing an upward trend and increases across mediums. However, a pivotal question remains: how to make the best choice to ensure not only the health of the industry, but also the robust success of individual publishers?
When we went looking for writing that tackled this question, we found a lot of answers…but very little analysis. We found plenty of one-sided pieces that endorsed one model and dismissed the other… but few articles that looked at the very real pros (and cons) of both.
In an industry facing pivotal questions about the future, where publishers are looking to not only survive but thrive, an in-depth written analysis of multiple approaches to gaining revenue is necessary.
That’s why we decided to write that article—a balanced examination of the upsides of both advertising and subscription models—ourselves.
Subscription-based models: the only limit is imagination
“Users are ready to pay for content that delivers,” writes Anne Burns in a piece considering the merits of the subscription-based model.
It’s true—across the industry, publishers are finding success with subscriptions. Beyond the tried-and-tested subscription model that offers readers access to content for a flat rate, publishers are trail-blazing innovative models.
Digiday, writing on the renaissance of the subscription model, summarized the ways in which a number of publishers have made it work. The Young Turks, for example, favours a tiered structure where top-paying enthusiasts pay $1,000 a month to access perks that include “a monthly one-on-one call with its founder Cenk Uygur, to pitch improvements and ideas.” The lower tier subscription includes “a quarterly call with staff,” t-shirts, discounts, and (of course) unrestricted access to content.
Politico, by comparison, offers package subscriptions to events and content. Business Insider offers, among other things, research reports. Publishers that cater to niche interests can offer sneak-peek experiences, allowing super-fans of, say, motor sports, to access content before the rest of the world.
There are, in short, as many subscription models as there are innovative approaches to creating subscription models—but what are the upsides and downsides to relying on subscribers?
Pros: from super-fans to retained revenue
- Fan bases and engaged readers are key to the successful subscription model. If a publisher can count on these, they can count on consistent and predictable revenue.
- Subscription models can build brand loyalty. Attracting subscribers and rewarding them with an ideal user experience and top-notch content has a stunning effect—users respond strongly, which in turn helps bolster their engagement, grow the publisher’s fan base, and results in (as we noted above) consistent revenue.
- Subscription models eliminate the middlemen. This is beneficial for two reasons: not only does the publisher get to retain more of their revenue, but it makes predicting revenue far simpler. It’s a streamlined approach and allows for special focus to be paid to the core audience.
The New York Times’ 9 million paid digital subscribers are a testament to this, representing a confluence of these three upsides. With a strong fan base fuelled by the brand loyalty of NYT’s readers, the publication has managed to stand tall without relying on middlemen.
But what about the downsides to subscription models? What potential weaknesses exist in being reliant on subscriptions, fans, and brand loyalty?
Cons: disappearing readers and continuous output
- Paywalls can act as repellent, sending users off in search of similar content. Unless the content is truly unique, many users will be deterred and dedicate the time and energy potentially spent on registering (and paying) to scouring other publications for similar content.
- Think of it as the opposite of brand loyalty: if readers aren’t specifically engaged with your content, they’ll often evaporate. The super-fans may remain, but casual readers—those without prior knowledge of your publication, or those who have curiously but aimlessly followed links—might disappear.
- Subscription models put publishers in the position of continuous output. When reader loyalty and satisfaction is the name of the game, publishing valuable content continuously becomes paramount. Asking users to pay is a big ask: they’ll demand staggering levels of performance and if they feel less than enthusiastic—or if there’s a good reason to take their business elsewhere—they may cancel their subscription.
Advertising-based models: streamlined and secure results
Unlike the Wild West-like landscape of subscriptions, where models are tried-and-tested according to necessity and imagination, advertising models tend to be more straightforward.
Direct advertising involves selling the publishers ad inventory… directly to the advertiser. Programmatic advertising, which sees the automatic sale and purchase of ad inventory, involves bidding (check out our analysis of how programmatic bid requests work) and a variety of auction models (which we discuss in a previous piece that outlines the ins and outs of monetizing via programmatic advertising).
It’s an egalitarian approach to monetizing and one that upholds the idea of bolstering user experience without becoming reliant on issues of loyalty or issuing tiered levels of perks. As with subscription-based models, however, it comes with a number of pros and cons.
Pros: engaged users and revenue growth potential
- Who doesn’t like a freebie? Users enjoy free content. When nothing is blocking them from accessing the wealth of information and entertainment a publisher has to offer, they respond well—by engaging with the content on the site. This, in turn, builds loyalty and sustained interest over time.
- As opposed to subscription models—and indeed, with direct advertising—programmatic technology is automated and streamlined. This results in less stress for advertisers, and less concern over survival and growth. The time and energy previously spent on considering monetization can be spent, instead, on producing content.
- That lack of stress does not, however, come at the cost of control. Publishers have a lot of power over ads, including what budget fits their needs and how the ads are being served.
- Growth potential exists. According to IAB, ad revenue delivered double digit growth in 2022. In fact, as reported in April of 2023: Between 2021 and 2022, internet advertising revenues grew 10.8% year-over-year (YoY), totalling $209.7 billion with net increase of $20.4 billion.
Of course, there are also a few cons… but there are also a few long-standing myths about programmatic advertising in need of busting.
- Multiple players get a slice of the pie: publishers only get a cut of the revenue due to intermediaries. As we discussed previously in a piece titled The Best SSP’s For Publishers, publishers have a choice and can (armed with the right knowledge) choose the best SSP for their website(s).
- Demand prices can fluctuate. As we wrote earlier this year, “the online advertising landscape is often prone to dramatic shifts, leaving publishers with complex revenue optimization decisions to make.” We also looked into ways to combat this fluctuation, outlining practical tips on the use of price floors.
- People block ads. That being said, the ad block demographic is woefully misunderstood.
Adblock users have long been seen as a demographic committed to one thing: avoiding ads entirely. The truth, however, is more nuanced.
Research shows that adblock users don’t hate all ads—just the ones that negatively impact their user experience. Most adblock users, in fact, filter ads instead of outright blocking them. These users are eligible to be served Acceptable Ads.
In fact, the highly-educated and affluent demographic of adblock users represents an opportunity to recover revenue—one that many publishers are taking advantage of. As we reported previously:
Of the top 100 US publishers to employ adblock monetization strategies, Acceptable Ads is the most popular. In fact, all but two of adblock-monetizing publishers use Acceptable Ads. […] For a few examples of real-world publisher engagement success, check out AdExchanger’s story on how AccuWeather ‘shored up revenue by monetizing its ad-blocking audience,’ or this AdWeek piece detailing how ‘CafeMedia recouped millions through adblock recovery.’
If you’re interested in joining the ranks of publishers that have monetized adblock users, please reach out. It’s important that we dispel the myths surrounding ad blocking, and highlight how harnessing this demographic can help you meet your revenue goals.