“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:
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.
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.
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.
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:
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:
Or Klarna integrates sponsored listings:
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.
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.
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.
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 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.