What is an in-app subscription?
It is a feature providing users with access to premium content or functions for a fixed fee. Developers are constantly working to improve the quality of their products and to win the trust of users in the long term.
Top subscription-based apps include such giants as Netflix, Spotify, Tinder, Duolingo, and YouTube. Each of them has its own approach to customer engagement. For example, YouTube offers its subscribers the same content as other users, but the videos are ad-free and there is an added option of watching content in the background or downloading it. Netflix offers a month’s free trial. In some countries, though, the company has been seen to disable the free trial feature from time to time.
In this article, we'll walk you through four easy steps towards a successful subscription and explain how to measure subscription efficiency.
Today, subscription is one of the most popular and, importantly, profitable ways of mobile app monetization. A survey of 400 developers from the US and the UK has demonstrated that 56% of them use subscriptions in their products, with 36% stating that subscriptions generated more revenue than any other channel.
Indeed, subscription-based apps generate 1.5–2x more profit than apps seeking monetization through ads, paid installs, or in-app purchases. Moreover, several years ago the popularity of subscriptions skyrocketed, after which Apple (followed by Google) cut fees for app developers from 30% to 15%. As a result, in 2020, the 100 most popular subscription-based apps contributed USD 10.3 bn and USD 2.7 bn to the profits of App Store and Google Play, respectively.
Another significant benefit is that revenue generated by subscriptions is easy to predict. Many apps offer discounts for their 3, 6, and 12-month packages. This allows users to save money, while developers can get a clear understanding of the profit figure they should expect within 6 to 12 months.
Among all monetization options, subscriptions are best compared to in-app purchases. Both are monetization models where users are provided with access to additional features or content for a fee. But it is not all sunshine and rainbows here. Needless to say, paying subscribers generate consistently high revenue and form the basis for a loyal customer base, but developers also have to tackle a diverse range of issues, such as:
That is why many developers shun the idea of working with subscriptions. And if they do, they have little clarity on how to convince users to buy them.
An integrated approach and an understanding of key metrics can help cope with these problems. To learn more, check out our 2021 App Monetization Guide.
There is a group of apps for which subscription-based monetization would not work.
If you have read this far and feel that subscription will really work for you, let's try to figure out the best way to deploy it.
Assume you have decided to embed a system of subscriptions into your product. Where should you start?
Once the preparations are over, it is time to consider the best ways to implement the model. Shown below are four aspects that, if implemented, will definitely increase the profitability of your subscription.
Introduction of a product to new users (in our case, subscription details are a must too).
At this stage, it is important to make users understand how your product works and what value it offers, while also explaining to them how much they will pay and what they will get for their money. Your best bet would be to remind new users about the subscription option and the advantages and bonuses it offers, with weekly and then monthly reminders put in place after the onboarding process.
To optimize your onboarding process for subscription promotion purposes, we recommend running a large-scale A/B test covering a wide range of topics, from the wording of subscription plans to the color of the register button. If you have enough resources, it is best to customize the tests to the preferences of users referred from different promotional channels.
Once again, Netflix can be regarded as a good example of successful onboarding. Never mind that the service provides no free content, and the free trial option is removed every now and then. The important thing is that, just a few minutes into using the app, you can already understand the way it works, the benefits the subscription offers and whether you can cancel it or not.
A subscription trial is a chance to get free access to premium content.
A trial period is a prerequisite for any app by default. For users, this is a chance to find out what they are in for "on the other side". That is why you need to offer them the best possible experience.
The challenge here is to make up your mind about the trial terms and duration. You can offer a week or even a month of free access to all functions, or you can limit access to select features depending on the product in question.
Most often, you can see apps where basic functionality is available to all users for free, with extended functionality and top content reserved for subscribers only. This approach helps build a solid base of users to be further converted into paying subscribers.
As a matter of fact, you should strive to drive conversion up at every single point:
Spotify offers new users a truly generous trial period: a month for Family, Duo, and Student subscription plans, and two months for an individual subscription. Among other things, their Premium plan includes the track download option. During this lengthy trial period, many users have enough time to create offline playlists which they would hate to lose. This is a good reason for them to keep the subscription.
Rolling out packaged offers for a term of 6, 12, or 24 months is in fact the only efficient means of convincing customers to get a long-term subscription straight away. You should not neglect it, as the guarantee of constant income over a number of months is more than makes up for the money lost in the form of a discount.
For example, Duolingo, a popular platform for learning foreign languages, offers an annual subscription plan which is nearly twice as cost-effective as the monthly option.
To keep your paying audience, you should regularly update your product, improve and enhance functionality, and, most importantly, demonstrate this to your customers. For example, you can showcase a list of updates in your app store profile. This way, potential new subscribers will see that the app has not been abandoned by its developers while existing subscribers will remain convinced that they pay you for a reason.
Make sure to engage with your audience: monitor the content they are interested in, send update notifications, and ask for feedback.
Frequently, developers do not take the time and trouble to provide meaningful texts for the updates, attaching the same "debugging completed, stability enhanced" message to every update. Hey! Vina is an app that stands out from the crowd of competitors, as its version history gives a good idea of what has actually changed.
For an app to develop and for revenue to grow, developers should be able to collect, analyze and leverage data on user activity.
Whichever analytical system you are using, there are a number of parameters to be watched in the first place.
Normally, users fully adopt the subscription model after they have passed three key stages:
This is your sales funnel. You need to watch how the percentage of users transiting to each new stage changes over time (especially after major updates). This way, you will be able to see if you are doing it right.
Adjust your event to monitor the subscription page. This way, you will see how many users visit it and how many of them actually make a purchase. Pay attention to how these numbers change after the interface is updated. Use tracking links to monitor differences in the behavior of users referred from various channels.
Remember that your main goal is to increase ROI (return on investment) and customer LTV (lifetime value). You should keep an eye on how the revenue metrics change, as this is the key parameter of your product’s success.
In subscription-based apps, you cannot measure ROI and LTV the same way as you do in other monetization models. Time is a key factor here. You need to know when your users are fully ready to open up, and this is when you should start calculating their value. This could take days, weeks, or even months: a lot depends on the trial duration. Ideally, you should analyze new users’ behavior within the first two months and keep track of how soon they will switch to a paid subscription.
For subscription-based apps, of particular relevance are such basic metrics as user activity, retention rate, churn rate and ARPU.
MyTracker is one of those tools that can collect all the required data (trial and repeat subscriptions, extensions, conversion, income, and a multitude of other metrics) on its own. All the relevant information can be found in the Report builder or Templates.
Using MyTracker, you can see at any given time: the number of paid and trial subscriptions;