Study says ad-free subscription or consent-based ads can balance privacy and growth

New Delhi: Digital platforms can maintain profitability without compromising user privacy by adopting ‘pay-or-consent’ models that allow users to choose between ad-free paid experiences and consent-based targeted advertising, according to new research from the Indian Institute of Management (IIM), Lucknow.

As global discussions around data ethics and advertising intensify, the study provides an analytical framework for optimising pay-or-consent structures to ensure both sustainable operations and ethical data practices. The findings have been published in the Annals of Operations Research (Springer).

According to Suresh K Jakhar, Professor, Operations and Supply Chain Management, IIM Lucknow, as digital platforms navigate the crossroads of profitability and privacy, the research offers a structured lens to balance both.

"We show that respecting user privacy need not come at the cost of growth. In fact, platforms that design consent-driven, transparent business models can build stronger trust, higher engagement and sustainable profitability," Jakhar told PTI.

To analyse how privacy sensitivity affects user and platform behaviour, the research team developed a formal model representing the interactions among creators, platforms, and viewers.

"The developed model helped in providing measurable thresholds to help platforms decide when to rely on ads, when to introduce subscriptions and how to design hybrid models that respect user comfort while maintaining profitability," he added.

The study observed that subscription-based approaches tend to perform better when users are more concerned about privacy, whereas ad-supported models are more effective when such concerns are lower. A mix of limited, non-intrusive advertising alongside affordable ad-free tiers was found to deliver both higher user satisfaction and improved profitability.

"Platforms using less sensitive, contextual data can retain users' trust while still monetising effectively. In addition to key findings, the study offers practical parameters, such as price points, ad intensity and data sensitivity, that digital platforms can tune to optimise revenue without alienating privacy-conscious users," Jakhar said.

The research is relevant to platforms offering video, music, podcasts, and digital news services, sectors where shifting user expectations and emerging data protection regulations are prompting businesses to reassess their advertising strategies.

"With major digital platforms experimenting with ad-light and premium subscription options, this research underscores a broader market shift towards consent-driven experiences," he said.