[eli]

I wish this model would work, but I don't think it does in practice.

For one thing, it drives the value of the ads you do show way down to commodity prices. Think about it: no advertiser is going to spend big bucks on ads that are literally only shown to the cheapest and least engaged members of your audience.

It also misaligns the incentives. Now the ads function like the "nag screen" on old shareware apps. The site's revenue is tied to the ads being annoying enough that you'll want to get rid of them.

[acdha]

Good point: I think there could be a stable equilibrium on the other side but the transition might be impossible.