Key Takeaways

  • Ad revenue and subscription revenue models each come with unique pros and cons for businesses looking to generate more income.
  • Neither monetization strategy is better than the other, and they aren't mutually exclusive ways to generate revenue.
  • Implementing a hybrid approach to monetization takes a balanced and measured touch, but it can lead to maximizing ad revenue potential and subscription revenue for publishers.

A lot of publishers treat the ad revenue vs. subscription revenue debate like the Pepsi vs. Coke debate - they choose one or the other and stick to it. But really, both are good, so why must you choose at all? 

Ad revenue and subscription revenue can scale with publishers as they grow, and both can be consistent cross-platform revenue sources that do much more than keep the lights on as a primary source of income.

There has to be an answer, though, right? Not exactly. In the ad revenue vs. subscription revenue fight, there may not be a clear winner. But there is a clear way to maximize your revenue - regardless of which side of the argument you fall on.

Read on to find the answers to highly important questions about what is ad revenue and what is subscription revenue, and learn about the pros and cons of each model to combine them flawlessly for your target audience.

Playwire specializes in growing digital ad revenue for publishers, but we recognize that other revenue sources can play a big part in generating revenue. That's why we take a holistic, consultative approach to working with publishers. For the best of all revenue worlds, reach out to Playwire.

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The Publishers' Guide to Ad Revenue

The Ad Revenue Model

 

 

What is Ad Revenue?

Ad revenue, otherwise known as advertising revenue, is the money publishers earn from advertisers for placing digital ads on their publishing channels including web, mobile, over-the-top (OTT), and connected TV (CTV). You place ads - usually programmatically but also through direct sales - on your content and get paid a portion of advertisers' digital ad spend for the ad impressions you send their way.

Most publishers are familiar with the ad monetization model, but let's dig into the pros and cons of implementing an online advertising revenue strategy.

Ad Revenue Pros

  • As a general rule, when your website traffic and user base grow, your ad revenue grows.
  • Programmatic technology has made the buying and selling of digital ads mostly automatic and much easier for publishers to reach a broader audience.
  • Publishers are in control of dozens of factors that can increase their digital ad revenue and ensure a stable revenue stream.

Ad Revenue Cons

  • Until you have a large audience, ad revenue remains relatively small compared to other revenue models.
  • Yield optimization amounts to at least one full-time job, if not more. And that's time and resources that most publishers do not have to dedicate to managing ad placements, yield management, and optimizing their advertising space.
  • Every dollar that flows through the system gets a cut taken out of it by various players: demand-side platforms (DSPs), ad servers, ad networks, supply-side platforms (SSPs), and more. That means you get less of the total advertising revenue pie.

The Subscription Model

 

 

What is Subscription Revenue?

Subscription revenue is money that publishers earn from their user base for access to premium content, services, and products, typically on a recurring basis. It's one of the most popular revenue models for businesses looking to generate income from their customer base.

Perhaps the ultimate example of the subscription model is streaming giant, Netflix. Their subscription-based business model includes one monthly subscription fee that unlocks millions of hours of content and ongoing access to their service.

You can find examples of websites and apps making the subscription model work all over the internet. Sites put premium content behind a subscription paywall, apps charge subscription fees for use, and OTT providers, or Netflix competitors, spring up all the time, offering exclusive in-game items or additional features to subscribers.

Subscription Revenue Pros

  • Subscription revenue is predictable revenue. The number of subscriptions you have gives you a good idea of the rough monthly recurring revenue you should expect from your subscribers.
  • You keep the total revenue from subscriptions. That's as opposed to ad revenue, which goes through various third parties who all take a cut.
  • You can bypass the sometimes negative effects ads can have on the user experience with subscriptions (and save time on managing your online advertising setup).

Subscription Revenue Cons

  • Users need a lot more convincing to pay for a subscription than they do to see an ad before or while they view some free content.
  • The loss of one subscriber is often a much bigger hit to your revenue than the loss of one user in the ad revenue model.
  • If your content is leaked, copied, or shared, you have a much more difficult time getting users to subscribe and maintain customer lifetime value (CLTV).

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The Complete Ad Revenue Resource Center

The Hybrid Model: Combining Ad Revenue and Subscription Revenue

One of the most common examples of a hybrid subscription and ad revenue model is the old "remove ads" value exchange, in which a user pays a subscription fee to view your content without ads. While this is a common (and ingenious) monetization model, it's not the only way to combine ad revenue and subscription revenue to generate income.

For example, if you use rewarded video ads on your site or app, you can make the "reward" the ability to view a piece of content that would otherwise only be available to subscribers. That way, you encourage much more ad revenue from your users who aren't yet ready to pay the full subscription fee, while still offering additional benefits to your paying customers.

Hybrid Model Pros

  • The hybrid model can best serve all users: those who don't mind ads and those who would pay money to not have to see them, maximizing your potential revenue from both free users and subscribers.
  • Under a hybrid model, a user is never without value to you. If they don't subscribe, you still earn ad revenue from their ad impressions on your platform.
  • Using both monetization models can provide you with actionable information about your users' preferences and behaviors, helping improve user engagement.

Hybrid Model Cons

  • The technical lift to incorporate both digital ads and subscriptions can be difficult to overcome unless you have a good developer or ad revenue partner who can handle it for you.
  • You have to manage both revenue sources, which takes up more time and energy than focusing on a single model.
  • You must create and deploy content and ad strategies that fit into this complementary model without leaning too heavily toward one half of your audience or the other.

Boost Your Revenue: Optimize Your Ad Revenue and Subscription Models

Whether a hybrid monetization model works for you or you're more purely about ad revenue or subscriptions, you can be certain of one thing: You're not making as much ad revenue as you could be.

That's because you're not working with Playwire yet.

With Playwire, it doesn't have to be ad revenue vs. subscription revenue - it can be ad revenue and subscription revenue with hybrid monetization models driven by innovative ad units like rewarded videos and custom ad placement.

Ultimately, it's about what's best for you as a publisher. And we're all about what's best for publishers. To learn more about how we can help you maximize your revenue through various models, including subscription services and advertising revenue, reach out to the Playwire team today.

We can help you optimize your monetization strategy, whether you're looking to generate subscription revenue, boost ad revenue, or implement a balanced hybrid model that caters to your entire user base.

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More Ad Revenue Content

Browse some of our additional resources about ad revenue: