Pricing · Analytical model of content pricing and advertising revenue
Fee or Free: When Should Firms Charge for Online Content?
Management Science · 2017
Summary
The model suggests that the value of free access depends on advertising monetization and consumer demand conditions; a paid strategy is not necessarily superior simply because it generates direct subscription revenue.
For your marketing
Possible founder application
Useful for separating direct payment from indirect monetization when deciding what to make freely available. Map the model's assumptions to your acquisition cost, conversion and expansion economics before using it.
Reported result
What the study found
The model shows that the value of free access depends on advertising monetization and consumer demand conditions; a paid strategy is not necessarily superior simply because it generates direct subscription revenue.
Research question
What the authors investigated
When should an online content provider offer content for free, charge for it, or combine access fees with advertising?
Design
The authors develop an analytical model of online content provision that considers consumer demand and advertising revenue under alternative fee and free strategies.
Sample and setting
Theoretical analysis of online content providers; there is no empirical customer sample.
Scope and transfer
Limitations to keep in view
The findings are model-based and depend on assumptions about consumer demand, advertising revenue and content differentiation. It is not an empirical forecast for a particular SaaS freemium design.
Research sources
INFORMS publisher bibliographic record and author-hosted paper; theoretical rather than experimental evidence.