Platform design choices about ads and pricing affect everyone—not just ad viewers. A middle-tier ad-supported plan can fund better service for some users while actually making premium plans more expensive by degrading alternatives.
This paper analyzes how LLM platforms should balance advertising, subscription pricing, and service quality. It shows that ad-supported tiers can expand access but create utility gaps between users, that moderate ad caps can improve consumer welfare, and that cheaper compute paradoxically increases total ad revenue by making advertised content more valuable.