Pathological customers are, by definition, bad. I'm not using the term to mean "a synonym of non-paying customers, poor people, or people enthusiastic about the software."
I have heard from many other software developers, and seen in my own life, that charging more money disproportionately chases them away. I had a major decrease in the number I dealt with just when I went from $25 to $30, while sales went up. It is amazing: charge $5 more, see people suddenly have less hard drive failures, virus infestations, and "bad days". (I called you a dishonest SOB thieving from poor defenseless women when I mistyped my password... because I'm having a bad day, you see.) And it wasn't 20% less, it was closer to 80% less.
OK, my experience is much different. I would far far rather provide a free ad supported service than charge.
If you give it away free as ad supported, users tend to be extremely grateful. Once they start paying, even a tiny amount, they start to be more resentful and demand far more.
Don't ask customers to pay "a tiny amount". Ask them to pay according to the business value you believe your service provides, scaled to your business objectives (ie: eating, hot showers, customer acquisition).
What Patrick is saying over and over and over and over again is that you have to be willing to let the pathological customers go. One function of your pricing is to chase out the people who aren't driving your business, so you can concentrate on serving the people who derive the maximum value from your work.
Asking for small change is just about the worst thing you can do; pathological customers can afford it, and will immediately feel entitlement.
Not to be difficult, but I don't understand this reasoning. At the end of the day, you're charging someone, just not the end user. Why is charging advertisers preferable to charging users?
I have heard from many other software developers, and seen in my own life, that charging more money disproportionately chases them away. I had a major decrease in the number I dealt with just when I went from $25 to $30, while sales went up. It is amazing: charge $5 more, see people suddenly have less hard drive failures, virus infestations, and "bad days". (I called you a dishonest SOB thieving from poor defenseless women when I mistyped my password... because I'm having a bad day, you see.) And it wasn't 20% less, it was closer to 80% less.