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Subscriptions
Limitations. Subscriptions isn’t for everyone.
- It is not for everyone. You cannot write generic content and expect people to pay. Subscriptions tend to work for work products. In fact, many successful subscription editorial products are professional work products that subscribers can expense to their employers.
- Plateau point. Given that subscription editorial products target niches. There tends to have an extremely limited TAM.
- Power law in each niche. Success isn’t normally distributed. In fact, success isn’t even 80:20 (Pareto) distributed, i.e., top 20% take 80% of the revenue. It is likely to be 99:1, i.e., 1% take 99% of the revenue. Hence, subscriptions tends to work only for the elite exceptions in every niche (speciality or focused). For example, The New York Times, Ben Thompson, etc.
- Subscription fatigue is real. There is an upper limit to how many subscriptions a person will get. Hence, it might be better to bundle up.
You’ll need to adapt as you implement the subscription revenue model. Subscribers give you time, attention and money. Hence, all your decisions need to answer what’s best for your subscribers!
- On revenue diversity: You’ll need to work on your user experience so subscribers feel well served. Hence, indirect digital advertisements and subscription don’t gel well. To implement digital advertisement in subscription products, you’ve to serve premium advertisements that your audiences will appreciate.
- On owned identity: Once you move to subscription, you cannot claim to remain “the paper of record”. Your editorial judgement will start reflecting the values of your subscribers.
- Who drives and amplifies: Once a simple subscription stack is in place, then the editorial team can directly serve value to the customer! Given that the drivers are the editorial teams and product and engineering can amplify their impact.
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Trainings
How to think about AI for news?
Jul 25, 2023
16 min
It is always advisable to have one major source of revenue and then diversify by having multiple minor streams of revenue that de-risk you from that major source of revenue. For example, YouTube’s revenue split is 1:3 between subscriptions and advertisements.
Why it matters:
- It protects against risk of ruin.
- It protects against ups and downs. For example, revenue from advertisements is seasonal.
How
There are different forms of revenue models:
- Digital Advertisements, where revenue is Sessions Per User x Users x Pages Per Session x Ad Impressions Per Pageview.
- Subscription, where revenue is Average Revenue Per User (ARPU) x Active Subscribers (i.e., Existing Subscriber Base + New Conversions + Renewal)
- Affiliate and deals
- Events
- Sell playbooks, courses, trainings, etc. using micro-transactions
- E-commerce: For example, launch branded products
- Offer services like Job Boards
Downside
Some of these revenue models can be in opposition to each other and make commoditized businesses complicated. This in turn mandates the need for propensity models.
Revenue Diversity
Jul 23, 2023
When retention fails, you churn, i.e., lose customers.
Why it matters: In any business you want to make sure that you are adding customers faster than you are losing them and at the right Customer Acquisition Cost.
- Sometimes churn is good because your product isn’t for everyone! It is better to let them go than to keep supporting them or serving their needs.
Types: E-commerce businesses will measure transaction churn. In contrast, Subscription businesses will measure two forms of churn:
- Customer Churn in a specific period (say a month) is the number of customers lost divided by the number of customers you had at the start of the period. Use this if you have only one Pricing Tier. However, if you’ve more than one Pricing Tier, then you should calculate revenue churn or visualize churn by customer cohorts.
- Revenue Churn in a specific period (say a month) is the total revenue on the first day of the period minus the revenue from the same customers at the end of the period minus any value from Upsell. We need to subtract the upsells because they hide loss from churned customers.
Challenges: Churn is a delayed backward looking and you cannot get a live number.
Examples. Everyone has faced challenges with churn:
- The Wall Street Journal worries about aging subscribers.
- The Economist focuses a lot on retention.
Dictionary
Jul 8, 2023
What caused the conversion?
Establishing exact causality is very hard. For example, unknown to us, a conversion event might have occurred after the lead read one of our Candid Communication blog posts, seen a Digital Advertisements, received our Newsletters as a forward, or saw a post in their Social media feeds.
- There is also no way to perform A/B Testing to discover such causality because all of these actions are happening outside our platform.
- Additionally, conversion rate varies wildly based on the acquisition Channels.
So, who gets the credit? There are few models that can help estimate attribution:
Dictionary
Jul 8, 2023
Retention rate is the inverse of Churn rate.
Dictionary
Retention
Jul 8, 2023
Here’s the rationale behind the statements:
- Changes in interest rates directly impact the availability of capital, leading to a subsequent adjustment in the business model.
- Companies are recognizing that they are unable to monetize digital advertisements as effectively as Google and Facebook. This realization stems from the understanding that without an Identified Audience, it is impossible to gather First Party Data, thus hindering the ability to target advertisements.
- It is crucial to achieve revenue diversity to avoid being classified as escape products.
Insights
More companies will adopt subscription business model
Dec 2, 2022