Quantifying App Subscription Burn Out

In Apple’s March quarter earnings, they boasted that their platforms had driven 270 million subscriptions, mostly to third-party apps. Subscription business models seem to be in vogue as Apple and others continue to share the clear growth in subscriptions. Despite this growth, many have voiced their concerns over the subscription business model and how consumers may have a hard time tolerating dozens of subscriptions and could get burnt out by this business model.

Last week, we launched a study that was focused on apps and dug into how consumers make decisions on which apps to download, and which ones to pay for and why. I’ll be sharing some highlights of this survey publicly, but for subscribers, I plan on digging into a few of the important nuggets of insights the survey uncovered. One of them was some broader public opinion of the subscription business model.

Subscriptions are a Two-Sided Investment
In a series of questions, we asked consumers about what compels them to buy or subscribe to an app. We also looked at different options within subscriptions and if consumers wanted a one-time upfront pricing option instead of monthly. But where the real insights started to come out was in a comment box where I asked respondents to share any additional feedback with developers.

What came out loud and clear from respondents was their love/hate relationship with subscriptions. Countless respondents preferred to pay upfront for an app rather than subscribe to it. Most importantly, the comments emphasized that if they had to pay a subscription, they wanted to feel like they were getting their money’s worth and that the app would be updated and have new compelling features added regularly. This theme drew me to the conclusion that for a developer to charge a subscription, they must be deeply invested in its continual innovation. If they can achieve this, then the consumer also considers the subscription to this app an investment and one they feel is worth the continued price they pay.

Another point that stood out was the categories of apps consumers seemed to have a higher tolerance for when it came to paying or subscribing. Respondents seemed to think that paying a subscription for a weather app, or to-do list was not worth it. My interpretation of this is because there are so many choices for these type of apps and consumers can likely find what they need for free.

Apps like news, media, and entertainment (Netflix was happily called out as a subscription people were happy to pay), and things that were utility focused like Tweetbot, or 1Password, or productivity apps like wordprocessors, seemed to be things people were happy to pay for. For many of these apps, the perceived value was high to the individual, but the features or content provided were also not commodity features or things consumers felt they could easily get elsewhere for free.

There was a clear sentiment that many apps try to charge a subscription simply because it is the trend. Consumers seemed to be savvy about the type of app or service that is worth a subscription and those that aren’t. There was quite a bit of feedback from respondents encouraging developers to not just charge a subscription for the sake of it but to make sure the app features and functions fit a subscription model. Interestingly, there was quite a bit of hesitancy to subscribe to apps if they felt the developers would stop supporting the app or go out of business. This is why I intentionally refer to this as the investment mindset when it comes to trying to get a consumer to subscribe to an app or service. It will only work if they truly believe it is an investment.

Overwhelmingly, consumers want choices when it comes to paying for things. The free-app experience is the way to get consumers to try your app or service. Price was the number one thing, by far, consumers said they considered when determining to download an app. If the app sells them on the value and experience, they will be more open to a range of offerings around ad-removal, in-app-purchase, onetime fee or a subscription. Respondents also asked that what they get if they pay or subscribe be crystal clear in the explanation of you get when you pay. It seems there was quite a bit of frustration around this point where developers were vague in what the paid or subscription offerings entailed.

As I just dug into the subscription business model part of this study, what was clear is subscriptions are not for everyone, nor are they for every type of app. Developers need to align their business model with the core experience and features of the app. In many cases, a free with ads experience will work. Other times in-app-purchases are the right model. For subscriptions to work, it has to line up with the app experience and justify a recurring fee. The subscription business model will be the harder one to convert. Consumers will more heavily scrutinize the product and offering if a subscription is their only choice and therefore it must be worth their investment. The investment mindset is most heavily present when consumers are faced with a choice of subscription, and that will be the broad challenge standing before developers who want to go down the subscription hole.

Published by

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

Leave a Reply

Your email address will not be published. Required fields are marked *