November 22, 2019

A Short Argument Against an Ad-Free Internet

There is no denying that advertising on the internet is a deeply flawed business. So many middlemen have popped up between the advertiser and the publisher that most money is taken by the various participants of the ad ecosystem.

Then there is the blatant abuse where user data is collected without user approval and distributed by third parties who have never actually had a relationship with the user. From a privacy perspective, it’s pretty awful.

To make matters worse, there are some nefarious advertisers that push redirect ads or malware. With all of this, I understand why people push ad blockers and why companies like Substack talk about an ad-free experience as being the right way to build a media business.

For many companies, the push has been to focus on reader revenue. This makes sense because a publisher can make far more money from a single user who pays for content than they would from that reader’s ad revenue.

However, there’s a real risk that gating so much content will create a system of haves and have nots in digital media, which could have lasting effects on society overall—especially if you believe that journalists are the fourth estate.

Consider a low-income family that can’t afford a subscription to a reputable news source? They’re left with lower-quality sources that don’t present the best information.

Perhaps this isn’t a publisher’s responsibility to worry about. We need to maximize our returns since we are businesses after all. However, there has to be a better solution out there that doesn’t leave so many people without important information.

I come from a crypto background, having worked at CoinDesk for three years now. Many in that community believe that crypto can solve the monetization problem for publishers and I’ve heard a lot of pitches. Only one has ever really stuck with me and it’s not microtransactions.

The Brave browser is an interesting concept that tries to connect the three primary constituents in any ad transactions: advertiser, publisher and viewer. By agreeing to see “safe” ads, a viewer is rewarded with a cut of the revenue. But even if you don’t want to see these ads, you can pre-fund a wallet and then publishers can receive a percentage of that money based on how many pages they visit.

Unlike microtransactions, I find this interesting because the user only has to act once. They agree to fund their wallet with, say, $5 and then that money is split up amongst publishers in a proportional split relative to the number of pageviews.

Now, I agree, this is still a very farfetched idea for a variety of reasons:

  1. People need to download the Brave browser, which remains a small competitor to the big ones
  2. People need to agree to see ads (and Brave needs to actually deliver some ads)
  3. People need to actively fund their wallet and agree to a consistent withdrawal of money to pay publishers

This is an uphill battle for sure, but it’s a clean one. By building the wallet right into the platform, the browser can distributes funds to publishers without the user needing to think. That’s the only way this works. Frankly, I would like to see other companies build this sort of native monetization model into their systems. Chrome experimented with it years ago, but they treated it like a microtransaction—users had to agree to a payment each time and that friction reduces conversions.

Another option that I find appealing is a product called Scroll, which also blocks ads. Founded by Tony Haile, the founding CEO of Chartbeat, Scroll acts in a similar fashion as the browser where you subscribe to its service for a flat fee and then a percentage of the revenue is distributed to publishers based on engaged time on each publisher’s site.

The argument Scroll makes is that it can make you more money than you would make from ads running on the site. And for users that block ads, this gives publishers a chance to monetize an otherwise ad-blocked experience. Again, it needs to reach some semblance of scale for it to have a material impact on a publisher’s bottom line, but at only $5 a month, it’s an interesting proposal for users.

Consider this… A lot of media companies are stuck in the middle of the barbell. They’re not big enough or niche enough to justify a high-priced subscription. However, the ad-based business where they’ve historically made their money is one that is floundering, especially as advertisers grapple with the fact that they can’t use 3rd party cookies any longer in an efficient way.

Could a solution that rewards publishers proportionately to a user’s internet traffic be a third solution? I’m honestly not sure. But what I am sure of is that a closed, subscriber-only internet worries me. There has to be a better way.

Another thing I’ve been thinking a lot about is whether subscribers are entitled to an ad-free experience. I’ve got a subscription to The Washington Post and despite paying for the content, I’m still served ads.

There are two arguments to this that I am sympathetic to:

  • A paying subscriber should get the added benefit of not seeing ads. Give them a better user experience for being your loyal customer.
  • A paying customer is potentially more affluent, therefore advertisers desire to promote to them more since they theoretically have more buying power.

I think publishers should take the middle route. Do not allow any programmatic access to your subscribers. Instead, if an advertiser wants to target that specific audience, make them come to you directly. This could be through a subscriber-specific ad type that is a better user experience and comes with a higher CPM, giving you even greater revenue from this more affluent audience.

Ultimately, the reality boils down to this: not all content can be gated. For one thing, not every piece of content is worth a subscription. For another, living in a society where there are haves and have nots is a dangerous reality. However, there should be better incentives to help publishers earn money from these users that are not paying customers. I’m curious to see how Brave and Scroll evolve over time. It’s an uphill battle, but it’s certainly an interesting one.