Ads, Subscriptions, and the Internet Without Either

You don't find the best price through guesswork. You find it by eliminating market inefficiency.

The Common Display Ad Slot on Al Gore’s internet will auction off for $0.50 by the thousand. As in, you’ll have to show a thousand ads just to earn 50 cents. If you’re lucky, a Daily Active User for your site might see that ad 30 times, yielding you a whopping $0.015: one and a half cents.

By contrast, the lowest priced consumer subscription is typically $2.99 a month. Even at the lower end, that’s a vast difference from $0.015 a month. When such a large gap exists, it’s hard not to smell an opportunity.

Given this gap in price, you’re well motivated to do everything in your power to convert that Daily Active User into a paid subscriber. But doing that will…take quite some doing.

To begin with, most consumers do not want yet another subscription. On top of that, there’s payment processors, who charge a 7% fee on every one of these transactions. Paradoxically, these sources of friction make it hard to justify pushing your subscription price any lower.

And just what differentiates your paid service from your free one anyway? Typically, the subscription model resorts primarily to adding more and more ads until the user is over-encumbered by them—which I suppose is one way to marginally close the revenue/usage gap. It’s also playing a dangerous game with nuking your user engagement entirely.

I was asked recently if we all could simply do without ads. Wildly enough, in the opportunity to make more money, exists the opportunity for a better internet, better products, and a better internet.

To do that we’re going to take some good ideas from the past. Newspapers floundered under subscription models, but they thrived when you could buy one at the newsstand for 5 cents.

I’ve implemented a version of this on my own mod site, where downloads are available for a tiny fee.

There’s a key piece of infrastructure to make such an independent, granular model work. It’s the killer use case for Solana, an ultra-fast blockchain that has fees even more fractionally tiny than $0.015.

Whereas most modders rely on Patreon (subscriptions), I charge just 0.005 SOL per download, which (at the current time of writing) is 40 cents. The fee for the transaction is 0.00008 SOL, which is $0.0064. The fee wouldn’t be higher if I charged more.

Of course, there’s a variety of methods by which a business model like this could be accomplished. If one prefers a more internal approach, this can be implemented using a company’s own internal currency, and priced entirely through product-driven observable systems that give ultimate flexible control without the engineering lift.

On the opposite end of the spectrum for decentralized network effects, the SOL-based system could be integrated into existing ad bidding frameworks, allowing the user to be an active participant in their own ad auction. If the user wins, they aren’t shown an ad. This would close ads/subscription pricing gap in its totality, through the power of efficient markets.

Since everything is ultimately worth what its purchaser will pay for it, prioritizing market efficiency is the ultimate method for defining value. Let the invisible hand leverage your product-market fit.