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The Subscription App Paradox Hacker Noon

The Push For YourCash

You must sympathise with developersthey have challenges.

Creation of their beloved product, start-up funding, product refinement, launch, new features, making new friends because the others lost touch, oil to burn at midnight and divorce proceedings, etc.

Developers and entrepreneurs deserve to get paid for what they produce.

What I want to challenge is the preconceived notion that subscriptions are the best way.

Subscriptions are direct debits from your bank account and every $30 adds up.

Users need to think hard about the first rental and later renewals.

The Catalyst

Subscriptions or rentals, have been a business model since I can remember. Buying TVs in the 1970s was madness because they exploded, so we always rented.

Software companies switched to rental options in recent years. Adobe Photoshop could have cost you 600700 but 20 a month for todays subscription is affordable.

Microsoft charges 80 a year for Office 365 and while not much cheaper than a 120 one-off purchase, the latter excludes new feature updates and technical help.

Unlike larger software packages, apps are going through both an economic and cultural shift from one-off fees to rental.

In June 2016, Apple changed the iOS app store to encourage app subscriptions. Apple reduced their commission, 15% instead of 30%, and created 200 different price points for maximum flexibility. Google followed.

Hence, industry leaders push subscriptions with one purposeto make more money.

The Fallacy of Recurring Revenue

One selling point for subscription based apps is the alleged continuous revenue it generates for the developer.

The assumption relies on customers re-subscribing each year and new customer subscriptions to compensate for those who leave.

The size of the marketplace guarantees profit, with growth in customers projected to be 2.87 billion smartphone users by 2020. If the subscription model carves out only a small fraction of these users, it will gain traction. Revenue from app stores will pass $190 billion by 2020 so theres room for every business model.

Pay per download is falling out of favour with developers, everyone hates Ads, and the freemium model fails to guarantee user upgrades.

Subscriptions are here to stay and we need to accept it.

The challenge for app creators is to reverse the trend where 80% of users abandon apps within the year.

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