The Perils of the Subscription Model

Critics of big tech often think the problem lies with the ad supported model. So, forcibly moving the entire space to the subscription model would change things for the better. As Andrew Potter recently explained, however, the paid subscription model isn’t all that it is cracked up to be.

When Potter was the editor of a newspaper, he learned that “advertisers didn’t spend a lot of time trying to dictate what went into the news pages, presumably because they didn’t really care.” But, subscribers complained endlessly. “I lost count of the number of times I took calls from readers calling to complain about something they had read in The Globe and Mail or the Toronto Star or had heard on the CBC, but who swore it was in our pages.” He makes a convincing argument. Since the consumer is always right, inevitably they will begin to “make demands on the editors to shape the coverage in certain ways, which will tend to gradually shift that centre of gravity away from the middle, and towards the political extremes.”

The demand for paid tech platforms seems to be low as well. In a recent paper on the topic, economist Caleb Fuller estimated that even under generous assumptions, Google could hope to make somewhere between $14 and $15 million dollars per year if it charged a fee. To put that in perspective, the 2017 total revenue for Google’s parent company, Alphabet, was $111 billion.

The use of ad blockers also hints at the positive relationship between advertising and content. This research paper found that for every additional percentage point of site visitors blocking ads, the traffic was reduced by 0.67% over 35 months. Over time, sites that served fewer ads because of the blockers provided less content.

Let’s not dismiss out of hand the importance of the ad supported model.

Senior Research Fellow | Center for Growth and Opportunity | @WillRinehart

Senior Research Fellow | Center for Growth and Opportunity | @WillRinehart