Impact Pricing Blog

Understanding Fencing: Google’s Strategy to Maintain Regional Pricing for YouTube Premium

My friend Kathleen Greenler Sexton’s publication Subscription Insider pointed out that Google is tamping down on people using VPNs to get around their regional pricing for YouTube Premium. 

Google sets different prices based on where the viewer is in the world. This is good price segmentation. People in different countries have different willingness (and ability) to pay. 

Like any price segmentation technique, they need a way to enforce this. This is called fencing. It’s a way to keep people who should be paying a higher price from being able to get a lower price. The fence Google uses for YouTube Premium is the location of the purchaser’s IP address. Generally, this works great. Someone signed in from India gets a lower price than someone signing in from the US. 

Of course, smart shoppers try to get the lowest price. Some YouTube buyers figured out they could use a VPN to pretend to be somewhere they aren’t and get a better price. This must be a significant number of people because Google is now strengthening their fence. Google is removing the ability to purchase YouTube Premium through a VPN. 

You can almost think of this as a game. Vendors put up fences. Shoppers try to get around them. If only a few people “jump the fence” it’s probably not worth strengthening it. But when a lot of people get lower prices that they shouldn’t, vendors make the fence stronger. Then, shoppers try harder. And so on. 

Price segmentation is an important strategy for companies to capture more of the value they deliver to their customers. The fence is a key aspect to think through. How do companies keep buyers who should pay a high price from getting the lower price? There are many possible fences. For example, student and resident discounts are offered with an ID. Airlines charge more to business travelers by raising prices closer to the travel day. 

The key to finding your fences is to determine what is different between people who have different willingnesses to pay. After you’ve identified the differences, look for a way to charge different prices to the characteristic. If you’d like some help, reach out to us. Good luck. 

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Tags: google, pricing, pricing skills, youtube

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