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alternative advertising modelAdvertising shouldn’t be the only way for content producers to make money. Luckily, it isn’t – plenty of reputable organizations fund themselves without ads, online and off.

You, the readers, had a few things to say when James called AdBlock evil AdBlock, NoScript & Ghostery - The Trifecta Of Evil AdBlock, NoScript & Ghostery - The Trifecta Of Evil Over the past few months, I've been contacted by a good number of readers who have had problems downloading our guides, or why they can't see the login buttons or comments not loading; and in... Read More and when Chris asked AdBlock users to whitelist us Please Whitelist MakeUseOf In Adblock: A Plea From a Former Adblock Filter Developer Please Whitelist MakeUseOf In Adblock: A Plea From a Former Adblock Filter Developer It’s no secret that we’re not huge fans of Adblock here at MakeUseOf. But we know that some of you won’t let go of Adblock until it’s pried out of your cold, dead hands. If... Read More . Many of you understood their point of view, but one recurring theme in the comments was alternatives to advertising. A few people said any alternative model to advertising is a red herring because people in this era simply won’t pay for content under any circumstance.

That’s not true. HBO, NPR, Netflix and iTunes all show that people will pay for high-quality content, especially if it’s free of advertising. So let’s examine those organizations, but first let’s talk about Facebook. That site arguably sets the standard for any ad-based site with its 800 million active users who spend an absurd number of hours on the site. It earned $3.71 billion in 2011 revenue, or around $4.64 per user. Let’s compare that to a few ad-free services.

HBO

alternative advertising model

If there’s a medium known for advertising, it’s television, but one channel has gone without showing ads since the 1970’s – HBO. The premium cable channel – which shows a combination of Hollywood movies and original content ranging from Game of Thrones to Real Time With Bill Maher – has 29 million paid subscribers in the USA alone. Exact revenue figures are hard to come by, but according to SNL Kagan HBO earns an average of $7.27 per subscriber every month, which adds up to $223 million monthly or $2.6 billion annually.

And that’s just in America. HBO content is available in 151 different countries and last year earned 1 billion dollars internationally on the strength of shows like Game of Thrones.

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There’s no way around it – the revenue HBO makes from cable companies would be impossible to match with online advertising alone, because advertising itself would diminish the value people see in HBO to begin with.

It would also, it should be noted, be extremely difficult to match with an online streaming service. HBO currently doesn’t provide phone support, relying instead on the cable companies to do that, and the model that makes HBO’s revenue stream work depends on people paying for cable. Besides, why roll out an online-only option when your cable-based one is so incredibly profitable?

Netflix

The online video streaming service is similar to HBO – it offers movies in exchange for a subscription and shows no advertising whatsoever. It’s also similar in terms of revenue: last year the company netted $3.20 billion in revenue.

Netflix has a bad reputation online after some high-class screw-ups last year, but thanks to an ongoing global expansion the company continues to convince more and more people that access to TV shows and movies are worth paying for – even on the Internet.

It’s even begun to pay for its own content: this fall new episodes of popular sitcom Arrested Development will be on Netflix before they’re anywhere else. The company sometimes has trouble offering the selection its users would like, the result of ongoing negotiations with media companies who see more profit in models like HBO’s, but Netflix continues to grow regardless and insists advertising would diminish, not enhance, its revenue plans.

Time will tell whether Netflix is viable long-term, but the site’s already replaced piracy for many people.

Public Radio

The funding of public radio is complex, but a major chunk of it boils down to this – people appreciate the shows they can hear on the radio free of charge and willingly donate to keep their favorite stations alive. This chart, from NPR, shows that a large part of NPR’s total funding is donations from individual people:

alternative advertising examples

Corporate donations make up another chunk of funding, and are often tied to “underwriting”. This means companies get a brief on-air mention, typically no longer than a sentence. Is that an advertisement? It’s an argument worth having, but public radio’s listener-supported model is an example blogs and other website should think of as an alternative to subscriptions or advertising.

Don’t believe people online will willingly pay for high-quality work they like? Browse Kickstarter.

iTunes

alternative advertising model

Apple makes so much money sell hardware it’s easy to forget that it also sells a lot of commercial-free programming directly to consumers. The iTunes store accounted for $6.3 billion of Apple’s revenue in the fiscal 2011 year – only 6 percent of Apple’s net sales but a huge number nonetheless.

With iTunes, customers only pay for the TV shows, movies and music that they want. Apparently there’s an audience for that, even though there are plenty of free, advertising-supported entertainment options on the web.

Conclusion

All of these models have flaws, and none of them could be applied universally on the web. But the idea that non-advertising revenue streams don’t exist in this day and age is simply false. There are other ways for content creators to make money, and these major entities all point to different options.

Some of these companies come close to Facebook, others don’t. All of them offer access to high-quality information for a price, which people are willing to pay.

Advertising online isn’t going anywhere, but it’s also not the only option – which is good, because the value of advertising per user goes down each year. I think every company should at least consider exploring an ad-free model.

What do you think? Let’s talk about it in the comments below, but remember: the discussion isn’t about whether ads are evil, it’s about what sites can do to avoid resorting to ads. I look forward to your thoughts.

Image Credit: SCOTTCHAN

  1. Mark W
    August 4, 2012 at 2:14 am

    I think the answer, at least for text or image based content, lies in someone coming up with a genuinely usable system of micropayments - not whole dollars for a limited number of people to view content, but pennies or fractions of a penny per page impression, sufficiently small amounts that they don't irritate the user into saying 'I'm not paying for that", but enough that the bulk of traffic will add up to an income.

    The maths of ad supported pages is pretty simple - although obviously there are different models governing how revenue is obtained (i.e. Per click, view or sale) - but the truth is very, very few users do click, so averaged out across all users, the revenue per page view is very small. We're all paying for advertising through our purchases anyway; users know this, and I believe advertising is only acceptable because paying for content this way seems painless. If micropayments could be made almost equally painless, users might be persuaded to pay for content in exchange for clean screens and getting their privacy back.

    The really hard bit would be delivering a micropayments system in such a way that the content consumer can be confident they're not suffering the equivalent of click fraud, and that any losses would in any case be minimal - a few dollars at most. It would also have to be easy and unobtrusive to use, not requiring manual authentication for every page viewed. For example I find Paypal transactions largely painless for paying for small purchases, but it would be far too much hassle for even one in every ten pages.

    Advertising is, and always has been, a dead end for all but the largest ad brokers. For the small publishers, revenues and ad impressions are only going to decrease as users just decide enough is enough, of flashing banners and ads masquerading as content ad hit the ad blockers - I got so sick of the ads (and the tracking) I now run an ad blocking proxy server that covers all my devices. I am however more than happy to pay for content I like where the option exists at reasonable cost. Micropayments might return some integrity to content the web, with sites producing material to attract users than than pure ad bait. Personally, I'd be delighted to ditch the adblockers and put my hand in my pocket.

    • Damian Yerrick
      January 28, 2016 at 4:47 pm

      The iTunes model is analogous to pay-per-article, and its book section has plenty of "text or image based content". That's fine for longer-form works. But for short-form articles, such as news and editorials, the transaction fee charged by a credit card processor would exceed what the publisher actually collects. Block chain cryptocurrencies aren't necessarily the answer either, as Bitcoin miners in China with a vested interest in collecting transaction fees have driven the cryptocurrency's transaction fees higher and higher, even past those of credit cards.

      One possibility to work around payment fee overhead is a federated subscription network operator. Subscribers pay a flat monthly fee, and publishers receive a payment per page view on a parimutuel basis. A network called Adult Check succeeded with this model around 1999; Webpass.io is a more recent attempt.

  2. Mart Küng
    August 3, 2012 at 8:28 am

    One big problem with advertising is (on- or offline), that it tries to sell me a bunch of stuff I have no interest in. One of it's ideas is to make people buy, I know, but sensless spending isn't in interestof people. In cristmas there was a news peace about christmas shoping in USA. A lot of people were buying usles stuff and few commented, that "It helps the economy..." missing the point, that it woun't help them much. A word beginning with "r" game to mind watching them.

    But sometimes you would like to get offers: like when looking for a new computer or something. But forex trading and tvshop ads I see now on this site are not very helpful in this case.

    • Damian Yerrick
      January 28, 2016 at 4:54 pm

      "Sell[ing] me a bunch of stuff I have no interest in" is just as true of subscription channels, such as HBO and Netflix. Someone who wants to watch one episode of one show must buy a subscription to an entire channel. Someone who wants to watch four shows, each exclusive to a different channel, must buy a subscription to four separate channels. This was even more true of HBO before it introduced the stand-alone HBO Now service, as cable system operators required each HBO subscriber to also subscribe to a coax rollout, local channels, public access, home shopping, and whatever else the local cable monopoly wanted to bundle.

  3. Chris
    August 2, 2012 at 9:51 pm

    Check out the app Evernote. They are a classic example of the no ads, no strings attached game.

    • Justin Pot
      August 3, 2012 at 3:00 pm

      Yep: get the pro version and there are no ads. Great software, too.

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