Many digital media companies have embraced monthly and annual subscriptions. The business model allows digital media companies to provide a premium experience that offers more than the basic, often ad-supported service level.
Subscriptions are enjoying a new prominence as a revenue model for digital content and apps. Internet companies are exploiting the opportunity to boost ARPU (average revenue per user), thanks to recurring payments from a subscriber base.
In this new and exclusive report from BI Intelligence we look at how prominent players in five separate categories have tried to build a subscription-based revenue stream alongside ad-based businesses: the categories are video, music, news publishing, social networks/messaging, and dating apps.
Here are some of the key takeaways:
- Most companies operate on a “freemium model.” Subscriptions typically operate alongside an advertising business.
- Success in freemium boils down to offering a core audience exclusive value that can only be accessed beyond a paywall. The key is to target the most loyal audiences, and sell them on an expanded offering — bundles of features or content — that they find irresistible.
- Some publishers and apps have had mixed results with subscriptions, and vary in terms of how hard they have pushed them. Part of the problem is that ad-dependent companies are worried about limiting audience if they pack away too much value into a subscription tier.
- The proportion of paying subscribers within the total user base varies considerably across digital media industries. Each category is obviously different, and won’t face the same challenges and opportunities in dialing up the percentage of subscribers and subscription revenue. Here are some of the proportions of subscribers in apps’ user bases: Spotify (25%), WhatsApp (21%), Pandora (5%), Match Group (5%), The New York Times (3%), and LinkedIn (2%).