Is the Subscription Model Really the Future of App Monetization?

By June 14, 2016Uncategorized

Subscriptions have been the trending topic in the app world this week. Apple announced an updated subscription model followed by Google, who also announced a new split of 85/15 for subscriptions apps shortly after. The subscriptions model is certainly the talk of the day among app developers, creating a lot of excitement and new hope.

Applying a subscription model makes sense, instead of trying to convince users time after time to purchase a one-time in-app-purchase, you convince the user only once to pay on a long term basis. Sound great, doesn’t it ? Well it’s not that simple, here’s why.

Value vs. Commitment

We all know how hard it is to convince a user to spend $0.99 for a one-time purchase app. With a subscription you not only need to convince the user to open his wallet, but to actually commit. To win over a long term customer a publisher needs to provide real and clear value.

In the kids’ space we see few examples of successful subscription apps, which are mainly video services with big libraries, such as PlayKids, or educational platforms, such as ABCmouse. In both cases the value for parents is clear. App developers moving to a subscription model will need to ask themselves if they provide enough content for parents to be willing to pay on an ongoing basis.

Free vs. Paid

Most users don’t pay for content, this is the reality. Frankly there is tons of great content out there for free, even top kids’ brands create apps as brand utilities, that provide premium content for free.

In this reality where users are unlikely to pay for an app once, how likely are they to pay for it on an ongoing basis?

All You Can Eat vs. How Many Subscription You Can Eat

Subscription products normally give the impression that they are worth it as they provide everything your kid needs. Even if a parent is willing to commit to a subscription, how many subscriptions will he be willing to commit to?

Signing up for 1 to 3 probably makes sense, but anything above this is unlikely. That means that smaller publishers will need to either join forces or fight with the bigger more established subscription offers out there for parents’ limited commitment.

Bottom Line for Now

While the subscription model brings new $$$ opportunity, in reality it will only work for some.Those who have a enough fresh ongoing content will benefits from this greatly, while others will need to keep looking for other business model that work for them.

 

Image via VentureBeat