undefined | Better HN

0 pointsfunction_seven7y ago0 comments

There's a math inequality here.

Mike the Millennial is strapped for cash, and so won't pay for content directly. Alice the Advertiser wants to convince Mike to buy her products, so she places ads with Nick the Newspaper. Nick gets money from Alice, to provide Mike with content for no cost.

But doesn't Alice expect a return on that advertising spend? Doesn't Mike ultimately pay Alice more than he would have if he had just paid Nick directly?

I know it's a hell of a lot more complicated than this, but aggregated over all advertising industry revenue, and aggregated over all content subscription revenue, it seems that the ultimate price of advertising (once it percolates down to the consumer) will always be greater than an equivalent cost of subscriptions.

0 comments

1 comments · 1 top-level

saveferris7y ago

I was with you all the way to the end...subscriptions will always have to be higher than ad revenue to the publisher. Take facebook as an example. In 4Q2018 their average revenue per user in the US was just shy of $35. If no advertisers paid anything to FB and instead lowered the cost of their products accordingly then yes Mike saves some money...BUT, if he wants to continue to use facebook...facebook will have to charge Mike at least as much as what they were getting from the Alices, likely much more. There is no way Nick can provide a newspaper without either advertising or subscription fees. It's the basic rub of the modern internet, at least content providers and as of now advertising for a "free" service is the dominant approach.

j / k navigate · click thread line to collapse