Subscription Models

There are 2 classic business models for web businesses, or more generally put, for media businesses. These have and continue to be advertising and subscription based. Obviously advertising models are about eyeballs – how many people can you get to look at your content so that you can monetize them through advertisers. Subscription models are closer to the models in other industries, i.e. they involve selling the customer something they want rather than giving the customer something for free and charging someone else for access to them.

Today I want to talk about subscription models. At Indaba, we currently offer a single subscription product – a “Pro membership.” It offers members enhanced functionality including increased file transfer. We originally structured our subscription product this way because it was simple – there’s one thing to buy, and it’s easy to make a decision and understand what you’re getting.

Lately I’ve been thinking a lot about single product subscription models. There are indeed other examples of this – Flickr’s Pro account being the one that comes to mind most frequently. However, I am struggling to come up with examples of innovative web applications that go the other way, and create multi-product subscription models. I bring this up because it seems terrifically odd and counter to long-understood business logic. To market a product effectively, you have to segment your audience, and then figure out what each segment wants. If you do this right, you can then sell each segment a product that makes sense for them.

Single product subscription services lump every potential paid customer into a single group, potentially missing the opportunity to monetize customers that need a more targeted product and associated messaging. In Flickr’s case, this might mean structuring subscriptions that cater specifically to professional photographers, or design studios, or photo buyers. This goes for Indaba as well. Certainly something for us to think about.

Anyway, I suspect this may have happened because of the overall emphasis on simplicity which pervades modern design, web development, and business thinking. Also, the entrepreneurs who start web companies are often fairly green, and when you’re inexperienced, it’s much easier to err on the side of simple. Simplicity isn’t necessarily a bad thing, but it isn’t the end all and be all in all situations either.

Non-Profits vs. For-Profits – A Lesson on Entrepreneurship

I had an interesting call with a friend of Jesse’s this morning – he’s starting a web venture and is debating whether to do it as a non-profit or a for-profit. The idea is similar to Indaba in that it’s a web app for creative artists (not musicians in this case), and so we went through a lot of the same thought process a few years back when starting Indaba.

It’s an interesting conundrum – on the one hand, non-profits can get funding from foundations, grants, etc. and have a clear altruistic motivation. On the other hand, for-profits can involve a wider array of funding options more easily (angels, VCs) and are generally more nimble and market-driven (read: more efficient). I also happen to believe that it’s possible to provide valuable services in a for-profit setting (like Indaba has). After all, if a company isn’t providing something of value, it won’t exist for very long.

This isn’t meant to be a post about the pros and cons of non-profits and for-profits however. As a lesson on entrepreneurship I instead wanted to point out that decisions like these need to be driven by the preferences and objectives of the entrepreneur him/herself. In my call this morning, I asked the founder questions about what he wanted and why he was doing this. There are no right answers here. However, different answers can lead to different choices – if he wanted to build a web app he can sell in 2 years a for-profit might make more sense. If he wants his life’s work to be about helping artists and not necessarily profiting off of that goal, then maybe a not-for-profit makes sense. Or not. The point is this: entrepreneurs are very well served by sitting down and asking themselves this question: why am I doing this?