In this post I’m gonna share my thoughts on why the Ads monetization model has become so successful, and how could Value4Value over Lightning (V4V) replace it.

Why Ads model work?

People often dismiss Ads as pure evil, but I think the fact that so much of today’s internet business is funded through Ads justifies exploration into why? I see these advantages over previous solutions such as buying products or paying subscription fees:

1/ Less mental overhead for the creators: they don’t need to decide prices, and just focus on creating content with high engagement.

2/ Less mental overhead for the consumers: no need to make decisions whether to buy some content or not, and just consume whatever they want without affecting how much they pay.

3/ Easier onboarding for the consumers: no need to set up payment system (ie. fill in credit card information) for each website or app, just use it and the engagement is tracked behind the scene.

4/ Cross-borders: no need to have a US credit card or bank account to pay for a US service, just consume US content and buy local stuff through ads, and the conversion happens in the backround.

5/ Anyone can consume: no need to have a bank account in order to consume the content.

6/ Smooths out inequality: different consumers pays different price for the same content and nobody complains. Ie. wealthier people who buy more stuff through ads are subsidizin the people who don’t buy as much.

Can Lightning replace Ads?

I believe V4V can work better than Ads, but it’s not as clear sell as I used to think.

V4V does not solve the mental overhead (1/, 2/), which Nick Szabo wrote about long time ago. However, I think V4V offers plenty of opportunities to explore different solutions, and find what works the best, and thus I’m not too concerned about it. If nothing better, one could reimplement the Ads model using Lightning.

Technically, consumer onboarding (3/) is not a problem because anyone can start consuming without any Lightning setup, for free. However, I’m afraid that this will cause the rewards for creators to be significantly lower, and they will revert back to Ads. I believe we need to simplify this onboarding and most importantly make it reusable, ie. once you onboard to Lightning, it works for all content. I think Alby and Breez SDK are making great progress towards this goal, but in general unification seems hard to be accomplished in an open and decentralized system.

I think 4/ and 5/ are solved quiet well already.

It’s not clear whether V4V will smooth out the inequality (6/), since voluntary payments might bring less rewards than automatic percentage from other purchases. It seems feasible, but I think it’s also an opportunity for exploration with various incentives to bring more reward for the creators.

There are few benefits of V4V that I can see:

  • Anyone can become a creator and earn sats, without a bank account, without anyone’s approval.
  • V4V provides more direct connection between creators and consumers, removing the Ads platform as well as the advertisers. This could bring better efficiency, but more importantly it could enable interesting opportunities for richer interaction between the creators and consumers.
  • Lightning enables much better anonymity and thus better privacy for both sides.
  • Lightnin is open network and thus anyone can contribute and experiment with new ideas. This might be the key advantage since it could speed up the innovation dramatically. On the other hand, it makes it harder to capture value and build sustainable business.

What are the best use cases?

Which use cases were impossible before V4V? Which creators are not able to participate in the Ads world? Which use cases would benefit from a tight creator-consumer relationship?

Podcasting seems the obvious choise and there are projects exploring this. I would love to see more of those projects, and focus on increasing the revenue for the creators. It might make sense to start with podcasts focusing on Bitcoin world where significant percentage of the consumers already have Lightning wallets with sats.

Paywall articles is another idea I heard many times, but so far I don’t see much traction. I think the big publishers who are experimenting with paywalls are not the best use case to start with since their audience is very broad and it’s gonna be difficult to convince enough of those consumers to onboard onto Lightning just to read single article. I worry most of these publishers will go back to Ads. However, it might be possible to start again with creators targetting Lightning-enabled audience. For those, the V4V revenue might be better than from Ads.

Some creators also sell merchandise. This is could be a signal that Ads model is not working for them, and potentially great opportunity for V4V. Once a consumer has Lightning enabled, the experience of buying merchandise could be extremely simple, and with much lower fees. In addition, buying merchandise could be more tightly integrated into the overall experience.