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Ad-Supported vs Subscription Services: Which is Better?

Consumers are caught in the middle of two service models when it comes to content: ad-supported and subscription. Marketing studies show that consumers are willing to pay for subscription services, but only up to $20-$30. Another study showed that consumers vastly preferred ad-supported services, with over two-thirds of respondents saying they are willing to tolerate a certain number of ads if it meant that they didn’t have to pay.

Business owners are understandably tentative about which business model to adopt. For Aniview, the discussion on ad-supported vs. subscription models is one where each side has its pros and cons.

The Ad-Supported Model

The advertising-supported model means the business or service provides free content for users. To monetize the site and service, they host ads from other brands or companies and broadcast to their audience.

Pros of The Ad-Supported Model

Audiences love freebies and free services, and this is the core benefit of the ad model. It attracts users as they could use your company’s services at no cost.

Suppose your service is similar or better than subscription-based companies in your industry. It can potentially attract a large consumer base because it’s free.

Cons of The Ad-Supported Model

The problem with this model is that you won’t be able to get direct revenue. No matter how large an audience you attract, there is a cost to running the service for free. You won’t be able to get all of the earnings possible out of the monetization.

It also won’t be a consistent revenue stream. Advertising budgets may scale down due to various issues, which means you won’t be getting as much revenue from your advertisers.

Example of The Ad-Supported Model

When you visit the Google Play store, you’ll find thousands of free apps that offer their services. Many of them, especially games, offer in-app rewards for watching an ad. Others use ads as a gateway. Users have to watch the ads before they can access certain functionalities.

It keeps the app free and popular among users who often don’t want to pay for mobile apps. The company still gets revenue to continue developing more apps.

The Subscription Model

Subscription models charge users for the services or content that they access out of your company or website. Payments can be made monthly, quarterly, or annually.

Pros of The Subscription Model

Revenue that comes out of the subscription model goes directly to your company. You’re not paying a percentage to advertisers. You don’t have to worry about reduced advertising budgets as your subscribers automatically pay subscription payments every month. It’s stable revenue for your company.

Cons of The Subscription Model

If you don’t have many subscribers, you won’t make money in the first place. Subscribers are hard to come by if they find free options that are better than your service. The value of your product to your target audience is directly proportional to how many people would be willing to pay for it.

Example of The Subscription Model

Adobe’s shift from single-purchase full software downloads for the Adobe Creative Suite to the subscription-based Adobe Creative Cloud created discord among its loyal users. Countless creatives worldwide who rely on Photoshop, Illustrator, Premiere, and other services decried having to pay a steep monthly price for the continued use of the software.

The outcry boosted the popularity of open-source options and opened the market for freemium creative apps that do what Adobe’s Cloud does at less cost. However, Adobe’s software remains the most feature-rich in the market. It is considered an industry leader in this type of software. So, artists and creatives signed up to keep using their apps despite changing the subscription model.

Build a Base Before Making the Shift

Both models have their pros and cons. Companies have to consider their audience, the quality of their services, and the market’s temperament before deciding what model they will ultimately gamble on.

The studies and data analysis still prove that consumers are far more likely to opt for an ad-supported service over a subscription-based one. Before you make a subscription service, build a loyal customer base with an ad-supported service.

Monetizing through ads can give your business a chance to build a customer base that knows and likes your products as you improve upon them. Eventually, your consumers will become more willing to pay for a subscription.

Aniview provides companies with a way to monetize their services through the ad marketplace, connecting you to world-class publishers and advertisers. We even offer ad solutions for mobile in both Android and iOSContact us today to learn how to get started.