top | item 40674373

(no title)

sparker72678 | 1 year ago

tl;dr Ad-driven revenue models let you distribute your content to the widest possible audience while still making money.

The marginal cost of digital distribution is (basically) zero. As a result, you have an incentive to chase the widest possible audience. This is going to drive your pricing downward to reach as wide a market as possible. The math is like this: A 1000x audience size is worth it even if you lower prices 99%.

At the same time, advertisers would like to reach as large an audience as possible as well. And, in many cases, you can charge _more_ for selling ads to a larger audience. (Either the ad goes to a huge number of people, as in traditional brand advertising, or you have more niches to target.)

So you simultaneously have incentives to drive your own prices to zero, because it drives up your audience size, and that simultaneously increases the prices you can charge for ads.

From an on-paper business perspective, it's simply the best model. It's why TV, Newspapers, and Magazines all did this before the Internet, and it's why the incentives are bent even more towards ads in a zero-marginal-cost-distribution environment today.

Yes, in the real world there are tradeoffs to all of this, but these are the major incentives at play.

discuss

order

No comments yet.