Subscription vs. Ads: What’s the Best Revenue Model for Digital Publishers?

It is a difficult time to be a digital publisher. On the one hand, you need to cater to audiences that, over the years, have grown increasingly annoyed and resistant to intrusive ads. On the other hand, the same audiences are simultaneously suffering from subscription fatigue, where every brand seems to push their subscription model. Therefore, regardless of industry or brand size, publishers have to face a complex challenge: how to sustainably fund quality journalism and content in an era where user expectations and economic realities are constantly at odds. Well, let's try to answer this challenge.

Modern content monetization

The question of ads vs subscription models isn't just about revenue streams. It's about survival. What publisher chooses as their monetization strategy will in large part determine whether they thrive or become casualties in the rapidly evolving media landscape.

Now, both models have their pros and cons. On the one hand, only 17% of Americans pay for online news (according to the Reuters Institute Digital News Report), which means that 83% opt for the "free" option, meaning ads. But, if you go with ads, you'll get hit with the fact that 42% of online users use ad-blockers, a trend that is on a continuous rise. Thus, the difficulty of monetizing content as a publisher.

To properly cover this topic, we will go over the two primary revenue generation methods: subscriptions and advertising. We'll explore not just the mechanics of each approach, but the psychological and market forces that make them succeed or fail. Hopefully, this should be enough for you to make an educated decision for your future revenue streams.

Subscriptions - steady but difficult

At first glance, subscriptions do seem like an ideal payment model. What publisher wouldn't want to have a decent group of readers providing a steady, monthly revenue? The main problem with subscriptions is that you need to have a clear reason why you are better than the free option. Keep in mind that it isn't enough to only provide a single reason for subscribing. Running this model entails ongoing effort to maintain your number of subscribers. This can be tricky, even with top-notch content.

The psychology of paywalls

Paywalls are the primary mechanism of subscriptions. For subscriptions to have a purpose, you need to have some content that is only available to subscribers. How much of this content is hidden behind the paywall, and how much is shown to the viewer who doesn't pay, is a difficult figure out. It requires both a decent understanding of your audience plus a fair amount of testing.

If you wish to employ a subscription model, you first need to ensure that you have quality content. This not only means covering interesting topics, but doing so in regular intervals. As we said, you need to provide a clear reason why your subscribers should keep paying you and not switch to one of your competitors that uses ads. And this clear reason is based on content quality and regularity of publication.

Besides this, there are several psychological factors that determine whether a subscription model will be effective. Behavioral economists have identified some of these key factors:

The Endowment effect 

Once readers pay for content, they psychologically value it more highly and engage with it more deeply. This not only keeps viewers more committed to your content but also motivates them to recommend it to friends and family.

Sunk cost fallacy 

Subscribers are more likely to continue using a service they've paid for, even if usage declines. This provides some leeway as you don't have to constantly maintain content quality. But, while you can afford one or two temporary dips in quality, know that the sunk cost fallacy doesn't last for long.

Status signaling

Certain publications become professional necessities, where not subscribing could signal being out of touch. This usually happens when publishers manage to build themselves into an authority within a community.

Feeling of community

It is quite natural for subscribers of a specific brand to perceive themselves community. After all, they are committing funds to something they think is valuable.

The challenges of the subscriptions

While the subscription revenue model does promise steady revenue and community building, it does have certain pitfalls. Industry benchmarks show even successful publications typically convert only 5-20% of their audience into paying subscribers. This creates constant tension between:

Sampling vs. Paywalling 

How much content should you offer for free to attract new audiences? Too little, and free users won't be able to discern what your content is about. Too much, and there won't be a reason to subscribe, as free users already get enough for free.

Price sensitivity

Finding the optimal price point that maximizes revenue without depressing conversion. What your customers find fair to pay for subscriptions, and what you would like them to pay, are often quite different numbers.

Churn management

No matter what you do, you will always lose subscribers. But, while this is a fact, it is also a fact that keeping subscribers is between 5 and 25 times cheaper than finding new ones. This is why you'll need to work on reducing cancellation rates through engagement strategies. Decent onboarding, predictive churn-modelling, win-back campaigns... These are all things that a subscription-based publisher needs to be familiar with.

Verdict

While the subscription model does hold tremendous promise, it is often difficult to put into practice. You have bigger publishers like The New York Times, The Information, and The Guardian that work on a subscription basis. But it would be a mistake to think that a rookie publisher could mimic their results. After all, they have the reputation that earns status signaling, which takes years to build.

On the other hand, if we focus more on smaller publishers like Defector Media, The Lever, and The Hustle, we can see that it is possible to use a subscription model. What they did was focus on a specific niche and manage to make their content relevant enough to garner subscribers. So, in practice, those publishers that have a specific niche to focus on could potentially make the subscription model work.

The advertising model in the privacy era

Let's now turn our attention to ads and their potential in the modern online landscape. Not so long ago, ads were a great way to generate revenue. With proper ad placement, you could look to provide free content to viewers and earn from click-throughs. If you had decent tracking and knew who your audience was, you could set your ads up so that they are more relevant to the viewers, thus yielding better results. While this still holds true, there have been certain seismic shifts that have changed digital advertising:

1. ‍The privacy revolution - While tracking was a useful tool for advertisers and publishers, it did pose certain privacy concerns. As a way to address these concerns, GDPR, CCPA, and Apple's App Tracking Transparency have been introduced. While it is still possible to track viewers in certain ways, it is hardly comparable to what it once was.‍
2. Ad-Blocker adoption - While limited use of ads was a welcomed way to both gain revenue and forgo subscriptions, not all publishers chose to limit themselves. An overabundance of ads has led to over 42% of internet users now employing some form of ad blocking.‍
3. Attention span - Lastly, unless the ads are at the forefront at the beginning of the article, you can pretty much forget they exist. The average attention span for digital content has dropped to just 15 seconds, which means that any ad that isn't at the forefront is likely to be ignored.

The psychology of ads

In spite of all these hurdles, ads frequently outperform subscription models due to deeply ingrained cognitive biases and user behaviors. This is because there are certain psychological fators that come into play only when we perceive something as being "free":

The pain of paying

A big reason why people still prefer ads is the aversion to spending. Psychological research has well established that people feel more psychological pain from spending money than they gain pleasure from acquiring something. As it turns out, ads remove this friction by having users "pay" with attention rather than cash. You can see this in practice, where even a $5/month paywall loses 90% of visitors because the brain overvalues immediate loss (payment) over long-term gain (content).

Default bias and passive consumption

While engaging users is a worthwhile effort, it is useful to keep in mind that most users prefer inaction. In the case of revenue, this means sticking with free, ad-supported content over active decisions (entering a subscription plan).

The Freemium paradox

As well established rule of Psychology is that we are creatures of habit. Once users get something for free, they anchor to $0 as the "correct" price. This means that introducing a paywall feels like a loss of privilege, which triggers resentment ("Why should I pay now?").

Short-term gratification

Subscriptions, by design, are a long-term investment. You pay now, so that in the long run you won't have to suffer ads. The problem with this is that people tend to overvalue immediate rewards (free content now) over delayed benefits (no ads later). Some choose to use more engaging content, like web stories, as their basis for ad content. While others use psychological tricks to optimize content for instant dopamine hits (clickbait, infinite scroll).

The "Privacy Paradox"

If you were to ask everyday users whether they dislike tracking, they would likely proclaim that they do. But, in practice, most tend to prefer free, personalized ads over paying. Publishers can monetize this hypocrisy via behavioral ad targeting. It is only the ads that have no concern for us that we find annoying. If they happen to recomend something that we like, it is likey that we'll pay attention.

The adversity of ads

What we've outlined so far might make it seem that ads are still the preferred option, especially for publishers who aren't sure how to overcome the subscription hurdle. Well, while they are certainly a viable revenue model, ads do have certain hurdles to overcome:

Ad Blockers

The mere fact that over 40% of internet users employ ad blockers (rising to 70%+ among Gen Z) should be a cause of concern. Publishers lose 20–50% of potential ad revenue due to blocked impressions. There are ways to deal with this through soft measures like: Detect ad blockers → show a polite message: "We rely on ads. Whitelist us or donate $1/month." Or non-intrusive formats (sponsored content, in-text ads) that bypass blockers. But, even with these measures, ad blockers will pose a considerable problem.

Declining CPMs

Where a subscriber would earn $10 per 1,000 views, an ad-based publisher earns $1. This unfortunate metric shows just how much more traffic is needed to produce the same revenue. There are certain ways to increase the value of ads, either by bypassing programmatic auctions or focusing on high-value ad formats. Even with these, it can be difficult to drive enough traffic to yield decent revenue.

Intrusive Ads = High Bounce Rates

One of the easiest ways to drive people away from your website is with intrusive ads. A bad UX will yield fewer return visitors, which in turn will result in less ad inventory. To overcome this, publishers need to increase ad standards and ensure that their ads are in line with their content. This, as you can imagine, takes a fair bit of A/B testing.

Verdict

Publishers best suited for ad-supported revenue models are those with high traffic volume and broad audience appeal. This makes them attractive to advertisers seeking scale and targeting opportunities. Large publishers like BuzzFeed and Vice Media thrive with ads by leveraging viral, shareable content that drives massive pageviews. You also have niche publishers like Bored Panda (focused on feel-good stories) and The Drive (auto enthusiasts) succeed by delivering highly targeted audiences that command premium CPMs. These publishers excel because they optimize for both quantity (traffic) and quality (audience demographics), often using native advertising and programmatic demand to fill inventory efficiently. Additionally, their content formats: listicles, videos, and interactive web stories encourage longer session durations, increasing ad exposure.

However, ad reliance works best when supplemented with diversification (e.g., affiliate links or branded content) to mitigate volatility. Smaller publishers, like local news site Patch, show that even with modest traffic, hyperlocal ads (sold directly to small businesses) can sustain operations by offering unmatched community reach.

Final thoughts

As you can see, there is no clear winner in subscription vs. ads. Both have advantages to leverage and hurdles to overcome. The main question is which model is better suited for your brand. If you understand your audience, you can better use the psychological factors that we've listed and ensure that whatever revenue model you opt for will have the desired effect. We would also advise you to consult with your audience and see whether a hybrid model could potentially work for you.