Why Subscription Services Should Embrace Ads

Sarah Wheeler
Sarah Wheeler
Why Subscription Services Should Embrace Ads

“But users pay premiums for our content. If we show them ads, they’ll leave.”

This objection often keeps subscription-based platforms from monetizing their site/app with ads. Their worries are reasonable, but unfounded.

High quality, relevant ads can actually enhance the user experience while driving new revenue. Here’s how:

Ads keep subscription prices low

Subscribers pay for top-notch content, whether that’s a video game, podcast, newsletter, blog, etc. But eventually, growth stagnates or production costs increase, often pushing companies to raise their prices.

Enter: ads.

Ad revenue gives you capital to offset declining margins or increased costs. You can maintain users’ premium content without raising fees, or even lower subscription prices and grow your customer base.

Ads are a win-win-win. You increase revenue; users don’t pay more; and advertisers reach their target audience.

Ads incentivize content creation, providing value to your customers

Additional revenue doesn’t just keep fees low: it gives you the capital to create more content. If you’re a subscription news site, you can use this money to hire more reporters, leading to increased and better coverage. Such incremental value could be the difference between the user renewing or not.

Another example is Spotify, who inserts audio ads into their podcasts even for paid users. This money flows to their hosts, many of whom can now make a living as podcasters. Without such reliable income, one would expect fewer hosts and less content to consume — a poor user experience for subscribers.

Spotify promotions

Users don’t mind ads as much as you think

Nobody wants ads to negatively affect subscription rates. But do ads really cause lower subscription rates or decrease user satisfaction?

On the contrary, a Cal Poly study found that user-friendly native ads had no impact on the consumer’s view of the website. In other words, users either didn’t notice the ads or didn’t mind them.

Take Taxnotes.com, a subscription-based service. After integrating ads into articles, they expected complaints. In reality, as Lisa Samuels, their Program Engagement Director, noted,

“After we launched our direct-sold ad product, we had only a few people complain. We didn’t find ads had an impact on subscription rates.”
Lisa Samuels, Pogram Engagement Director of Taxnotes.com

Ultimately, ads are everywhere. Billions of people use services like TikTok, Facebook, Amazon, eBay, and so on. These sites/apps, while free, bombard users with in-feed promoted posts and sponsored products, and yet thrive in their verticals. Ad revenue has enabled their growth, not hindered it.

Other subscription services already do it

You won’t be the first subscription platform with ads. And if your competitors monetize with them already, they could out-compete you with more content and lower subscription rates.

Many industries have paved the way, like:

  1. Online newspapers - The New York Times, The Washington Post, and others require subscriptions yet display in-article ads. This is capital they can use to keep subscription costs low and hire more reporters, leading to additional content.
  2. Streaming services - While a big appeal used to be no commercials, Hulu now serves video ads during shows. This enables them to have both a premium service (no ads) and a lower-cost package to users who don’t mind ads. Hulu promotions
  3. Gaming - Fifa integrates in-game native ads throughout the playing experience, though their games typically cost money. gaming promotions
  4. Newsletters - Substack connects readers to writers for a monthly fee, but many emails are sponsored, providing the creator with additional revenue to help produce content.

Ads don’t have to be obtrusive banners

Obtrusive and irrelevant banner ads frustrate users. Bombarding them with such ads could indeed lead to user attrition.

Enter: native ads

Native ads are ads that seamlessly integrate into your feed, site experience, search results, and more. Often they look identical to your standard content, except with an added “sponsored” or “promoted” tag.

For example, WeTransfer displays native ads on their upload page: wetransfer example

Or Klarna integrates sponsored listings: klarna example

These ads are engaging, curated, and provide a better experience than a blank background or a random banner ad.

When debating ad monetization, prioritizing native ads - or relevant, direct-sold banners - will be key in staving off upset customers.

Having the right advertisers is key

Relevant ads keep users happy. The New York Times, for example, runs a State Street Global Advisor ad in their Business column section. These ads provide value because their content aligns with the paid content. Nytimes example

By necessity, such ads are direct-sold, meaning you have a direct relationship with the advertiser. The alternative is using an opaque ad exchange where any advertiser could buy the slot. Annoying retargeted ads or off-brand advertisers could frustrate subscribers.

Should you monetize your subscription platform with ads?

Ad revenue provides the capital to grow, while also providing value to your customers, whether that’s through incentivizing additional content or keeping fees low.

It’s naive to think that no subscriber will get annoyed, but if Spotify, EA, The New York Times, Hulu, Amazon, Facebook, Zoom, and many others can thrive even with ads, then there’s precedent that ads do more good than harm.

If you’re looking to launch native, direct-sold ads on your subscription service, we’d love to chat. Kevel’s APIs enable you to serve user-friendly ads anywhere - websites, apps, DOOH screens, podcasts, newsletters, and more. We already work with subscription services like The Motley Fool, Tax Analysts, WeTransfer, and more.

To learn more, contact us today.

Sarah Wheeler
Sarah Wheeler

Sarah is an experienced writer with a software background, allowing her to translate between ad tech experts and lay readers. As Kevel's Associate Product Marketing Manager, she helps broadcast new products and features.