Online Advertising is a Regrettable Necessity: On the Dangers of Pay-Walling the Web

The exponential growth of the web and its benefits can be attributed largely to its open model where anyone with internet connection can access information on the web for free. This has created unprecedented opportunities for various members of society including the most vulnerable, as recognized by organizations such as the UN. This again can be attributed to online advertising, which has been the main financier to the open web. However, recent trends of paywalling information and services on the web are creating imminent dangers to such open model of the web, inhibiting access for the economically vulnerable, and eventually creating digital segregation. In this paper, we argue that this emerging model lacks sustainability, exacerbates digital divide, and might lead to collapse of online advertising. We revisit the ad-supported open web business model and demonstrate how global users actually pay for the ads they see. Using data on GNI (gross national income) per capita and average paywall access costs, we established a simple income-paywall expenditure gap baseline. With this baseline we show that 135 countries with a total population estimate of 6.56 billion people cannot afford a scenario of a fully paywalled web. We further discuss how a mixed model of the so-called “premium services” creates digital segregation and poses danger to online advertising ecosystem. Finally, we call for further research and policy initiatives to keep the web open and more inclusive with a sustainable business model.

💡 Research Summary

The paper “Online Advertising is a Regrettable Necessity: On the Dangers of Pay‑Walling the Web” argues that the free, open web—whose rapid growth and societal benefits have been underpinned by advertising revenue—is now threatened by the rising adoption of paywalls. The authors begin by recalling how the open model has enabled billions of people, especially the most vulnerable, to access education, health information, and economic opportunities, citing UN sustainable‑development goals and prior studies that document the transformative impact of free internet access.

They then review related work on online advertising, noting both its long‑standing criticism (intrusive ads, privacy‑invasive tracking, ad‑blocking) and its essential role as the primary financier of free content. A key empirical input comes from Papadopoulos et al., which reports that the median annual cost of a paywall per site is $108.

The core technical contribution consists of two analytical strands. First, the authors re‑model the ad‑supported ecosystem: advertisers embed an advertising cost (Cₐ) into the total price of a product or service, and this cost is ultimately paid by the end‑user at the point of conversion. Equations (1)–(3) formalize this relationship, demonstrating that users already “pay” for ads through higher product prices.

Second, they introduce the Income‑Paywall Expenditure Gap (IPEG) as a simple sustainability metric:

 IPEG = GNI per capita − (PWₐc)

where PWₐc is the estimated annual cost for a fully pay‑walled web (108 USD × 250 representative categories ≈ $27,000). Using World Bank GNI‑pc data, they calculate IPEG for every country and find that 135 nations—covering roughly 6.56 billion people—have a negative IPEG, meaning the average citizen could not afford the paywall burden. Many of these countries also lack reliable online payment infrastructure, further limiting feasibility.

The paper proceeds to critique the hybrid “premium” model employed by platforms such as YouTube, X (formerly Twitter), and TikTok. While premium subscriptions allow affluent users to avoid ads, they also fragment the audience: advertisers lose access to high‑value segments (luxury goods, high‑end electronics) and may withdraw spending, threatening the revenue base of the platforms. Equation 5 re‑expresses total cost as a sum over distinct user groups (rich, affluent, and the rest), illustrating how the removal of certain groups from the advertising loop reduces overall ad spend. Consequently, the authors argue that premium models exacerbate digital segregation, depriving low‑income users of quality content and information, while simultaneously endangering the broader advertising ecosystem.

In the conclusion, the authors reaffirm that no alternative business model currently matches the scalability and inclusivity of ad‑supported financing. They call for research and policy initiatives aimed at making ads more ethical, privacy‑respecting, and user‑friendly, thereby preserving the open web without resorting to universal paywalls. Limitations are acknowledged: the IPEG calculation omits other household expenses, the assumption of 250 “representative” sites simplifies real browsing behavior, and potential solutions for improving advertising are not explored. Future work is suggested to refine traffic analysis, incorporate broader cost factors, and design advertising frameworks that balance stakeholder interests while maintaining a free, inclusive internet.