arXiv AI By Yuhang Ji, Fasheng Xu, Tianjun Feng

Monetizing Intelligence: Advertising and Subscription Design on LLM Platforms

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The paper examines how a monopolistic LLM platform can balance advertising revenue, subscription pricing, and service quality. It finds that mixed ad-supported and ad-free plans can fund higher-quality service for some users while allowing higher prices for unchanged ad-free plans, and that an intermediate advertising cap can maximize consumer surplus. Additionally, reducing compute costs can improve quality and lower ad intensity, potentially increasing overall advertising revenue.

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