Balancing Profitability and Privacy: Insights from Pay-or-Consent Models

Researchers at IIM Lucknow explore pay-or-consent models that offer users a choice between ad-free experiences and targeted ads. This model seeks to balance profitability and privacy. Their study shows that subscription models work better with high privacy concerns, while ad-based models are more effective when concerns are low.

In a world increasingly concerned with data privacy, researchers at the Indian Institute of Management (IIM), Lucknow, have devised a strategy for digital platforms to balance profitability with user privacy. The study, published in the Annals of Operations Research, suggests pay-or-consent models where users choose between ad-free and ad-supported experiences.

The findings come at a time when global debates around user privacy and data-driven advertising are heating up. Research indicates that optimizing pay-or-consent models can lead to business sustainability and ethical data usage, providing platforms with a structured approach to respect user privacy without sacrificing growth.

According to Professor Suresh K Jakhar, the study offers digital platforms measurable guidelines to determine when to implement ads or subscriptions. It highlights that subscription models outperform ad-based ones when privacy is a significant concern. This research emphasizes a market shift toward consent-driven, user-centric business practices within digital platforms offering video, music, and other services.

(With inputs from agencies.)