Ads and subscriptions can coexist for digital growth:IIM study

Digital platforms can achieve sustainable growth by adopting pay-or-consent models that balance profitability and user privacy, according to a new study by the Indian Institute of Management (IIM) Lucknow. The research, published in the Annals of Operations Research (Springer), highlights that users should have the choice to either pay for an ad-free experience or consent to targeted advertising.

As global concerns over privacy and data-driven advertising intensify, the study offers a structured framework for platforms to combine ethical data usage with business sustainability. “Respecting user privacy need not come at the cost of growth,” said Professor Suresh K. Jakhar, Operations and Supply Chain Management, IIM Lucknow. “Platforms that design transparent, consent-driven business models can build stronger trust, enhance engagement, and achieve long-term profitability.”

To examine the relationship between privacy sensitivity and platform performance, the researchers developed a formal model encompassing creators, platforms, and viewers. The model helps determine when platforms should rely on ads, introduce subscriptions, or implement hybrid models.

The study found that subscription-based models perform better when users’ privacy concerns are high, while ad-funded models are more effective when privacy concerns are low. However, hybrid approaches featuring limited, non-intrusive ads alongside affordable ad-free tiers can maximise both user satisfaction and profits.

Professor Jakhar added that platforms using “less sensitive, contextual data” can monetise effectively without eroding user trust. The research also provides actionable parameters such as pricing, ad intensity, and data sensitivity to help platforms fine-tune their strategies.

Relevant to sectors such as video streaming, music, podcasts, and digital news, the study underscores a growing shift towards consent-driven, privacy-respecting digital experiences in response to evolving user expectations and data protection norms.