Managing advertising and subscription fees to maximize lifetime value

Advertising is an important revenue stream for sustaining media companies and platforms that can optimize customer lifetime value (CLV) when properly balanced with subscription revenue. Our proposed a (Formula presented.) Content/Ad Experience framework is designed to assist media managers and advertisers in identifying their specific scenarios, enhancing their understanding of the advertising ecosystem, and evaluating the trade-offs involved in calculating CLV. We discuss how the optimal combination of advertising and subscription fees for maximizing CLV depends on the quality of the content and the degree to which the advertising experience complements it. We extend Blattberg and Deighton (1996) decision calculus approach to quantify the trade-offs in two-sided media marketplaces. Our analytical findings indicate that CLV is impacted by shifts in subscription fees, advertising utility, and advertising revenue return.