Join the club

If you’re looking for a great business model, look no further than to the subscription model. The idea of having a customer pay for your product or service on a recurring basis over and over again for all eternity is mouthwatering. Of course customers seldom stick around for that long, but I am sure you get my point; the subscription business model is where you want to land in terms of both profitability, predictability and viability.

But the subscription business model also has its huge risks. And the primary one at that is the obvious risk that some day your customer will wake up and for whatever reason decide that she doesn’t want your product anymore – and then she cancels her subscription and leave. Gone is the ongoing revenue, the nice profit margins, the predictability of your business growth and the viability of your business model. You’re left with wondering what went wrong, a challenge to replace the customer with a new one – and cost you won’t get covered in the short term.

Nevertheless the subscription model works. It has mechanics that works like clockwork; smaller customers love the ability to stay on one month at a time and have the flexibility to say yes and no, when they need to access your product. Bigger customers love the ability to sign longer term deals, so they don’t have to spend time on handling the expense every thirty days. There are winning scenarios for all.

The question thus becomes if there is another way of looking at the subscription model from another angle than one of pure financial mechanics and convenience? Potentially one that lets you work with the model in the context of your startup and enable you to build an offering around your subscription model that will add rocket fuel to the value of the offering, while significantly reducing the risk of customer churn?

It can be little surprise that I think there is. And basically it has to do with framing the model in a slightly different context; moving it from a pure business model to a strategy about creating a sense of belonging with customers.

If you want you could call it a club. I have always been fascinated with clubs and their ability to get people from different walks of life together in supporting the same cause or team. I am especially fascinated when that sense of belonging to and supporting something endures during times of hardship. Times where you might have every reason to walk away, but you decide to stay because you are addament or perhaps just hopeful that better times and success are just around the corner.

Those dynamics have power and real merit, and I think it could make sense to try and work on transforming those into a startup context; i.e. how can you create your own ‘club’ and a sense of belonging with customers, where they will stay with you almost no matter what because what you’re delivering to them is above and beyond the product or service as it is right now.

In order to become a club, you need to define a mission and a sense of purpose that customers will want to buy into. While I realize that most startups – and other companies for that matter – have vision and mission statements ad nauseam, this is different.

This is no afterthought. This is absolutely core. This is what you and your customers need to believe can become true at some point in time that is not too distant out in the future. Where do you plan to take your customer? What’s the promise, you deliver to them? How does ‘the promised land’ look and feel once you get there? Is the attraction, benefits and value of it enough so that customers will buy into it, because they can already sense it now?

Next up you need to figure out what the perks of belonging to this club are, as you embark on your journey together. Just as with any other form of endeavor, you cannot succeed without gas on the engine, so what is your gas? How are you going to keep the engine running and provide your customers something that is more than enough to keep them engaged and believing in the ultimate destination? And, importantly, what is the cost of keeping them happy along the way? Is it at all tenable, and if not what can you do to ensure it becomes so?

It is about creating fans of what you do. Kevin Kelly described the 1000 true fans theory years ago that basically says that if you can find 1000 true fans, who will buy whatever it is, you produce, you’re set. At least as an indenpendent provider. But there is no reason why that shouldn’t be scalable to a startup scenario; consistently building a following that is passionate enough about the quest you’re on that they will be buying into everything you do the path towards the end goal.

When you manage to do that you not only delight fans and retain them for the onward journey. You also have the potential to look into decreasing price sensitivity, aka you can start working with your pricing. Fans are not necessarily that picky – they will support you a long, long way before they start being concerned – and most of them will (at least if you operate in the B2B space) be deploying other peoples money. For them the price concern will be even less important – provided of course that you stay the course and stay loyal to what keeps you together.

That in turn will enable you to get to predictable growth. You will start being able to pretty accurately model the potential of adding new things to the mix and as a part of that also figure out when the timing is right to adjust the price in return for added benefits from the ‘club’ membership. I am not suggesting it becomes easier as such, as these things are still very complex to get right. But I am suggesting that it should be much more fun, since you have got the mechanics of the model working on your behalf.

So with all the above things being said, what do you need to create a ‘club’ feeling around your product or services and give customers the sense of belonging and wanting to belong to your cause? The answer, of course, is the right mix of talent and the financial means to get there.

To address the finances first, I am pretty bullish that if you can come up with a model where you can show investors the predictability, reliability and viability of your model from a financial perspective, they will be keen to support it. Investors are always looking for growth opportunities, and if those come in tandem with manageable risk at an acceptable level, it starts getting interesting for them. So that will most likely not be the biggest challenge.

The bigger challenge is likely going to be to find and attract the talent that will make the model work for you. Because it takes some special skills both within storytelling but especially within customer success and support. Furthermore it also takes a mindset that gives above and beyond the short term optimization one. If you are looking to making this model work and base your startups growth and future success on it, you need to be clear with both the team and your investors that you’re in it for the long term.

That’s what it takes to create a real movement that is above normal considerations for retention and will deliver the predictable growth and bottom line year after year; a club people will feel passionate about.

(Photo by David Jackson on Unsplash)

The ‘Worldview’ biz model

Yesterday we held local elections in Denmark. Always a super exciting day where people come out to vote on the issues that matter the most in their everyday lives.

While ideology seldom gets a lot of room in the local election campaigns, the ingredients are still there to pit people against eachother in order to force a result and ultimately the way things will be run locally going forward.

So it matters what your message is, how you word it, the level of nuance (or the lack of it), how you get it out, and how you build a loyal following enough to stick at least until the fateful vote is cast on election day.

It’s essentially about your local ‘Worldview’ and getting the electorate to buy into that. And that got me thinking (a bit off the rails but please bear with me as I think it’s quite important):

If you are into the media business and have ever harbored doubts about the advertising driven business model in an online context, beware of the new dangerous animal in town:

The ‘Worldview’ biz model.

This is the business model, where content creators with a particular worldview go solo or band together in small groups to deliver media content with a certain ‘worldview’ that users can subscribe to for a fee.

While there is every reason to applaud a business model based on subscription, the danger of the ‘worldview’ model is that it is only successful because it is inherently polarizing.

Just as ads supported business models have an interest in creating sensation and conflict to get the eyeballs needed to monetize on ads, creators of ‘worldview’ media content have an interest in painting everything black or white according to a certain belief system to get loyal subscribers to fork out their cash to access the content.

This, of course, means we’re likely to get more and more of it. We can call it a wealth of niches of special interests. But we shouldn’t neglect the fact that probably a good part of it is inherently dangerous to the commonwealth.

Want proof?

Look at some of the people with the biggest subscriber followings for paid newsletters. You will see a good few of them coming from people who have very clear ‘worldviews’, who are excelling in flaming the views of others in order to keep them loyal, hungry for more – so they will keep paying the subscription.

The phenomenon should definitely be taken seriously, and it should also be scrutinized. We shouldn’t gloss it over out of sheer admiration in the ability of some to build a sizable subscription following in a digital media world, where we have struggled for viable alternatives to the ads driven business model for years on end.

This is serious. And could potentially become quite ugly going forward.

(Photo by Jason Rosewell on Unsplash)

Bond. Jeff Bezos Bond

Amazon is reportedly looking to acquire MGM Studios for close to 9B USD.

That’s a lot of money to fork up just to get in with a shout at becoming the next James Bond. You have got to hand it to Jeff Bezos:

When he does something, he does it in style.

Neither shaken nor stirred.

Just solid.

Let’s get serious for a moment, ok?

Not only will Amazon get its hands on the James Bond-franchise. Despite my obvious affection for 007 that’s a minor detail. What’s important is that they will get access to a content powerhouse that will be an interesting competitor in the streaming wars being waged between Amazon Prime, Disney+ and that ‘old incombent’, Netflix among others.

The really interesting bit is just how important a part of the overall Amazon offering, streaming is becoming. To me at least it seems like it’s a key ingredient in keeping the Amazon Prime rundle interesting and value for money for consumers. It’s the icing on the cake. After you have eaten the cake, that is.

Taken into a larger context it seems rather bizarre by now that we have been discussing the value of content over the years as something that approached zero, when it’s becoming fairly obvious that great content is a key differentiator that makes the bundle turned rundle ever more evergreen and attractive to consumers.

People have never spent more money on content than they do today. They are just spending it with a set of very different providers and value propositions than they were a couple of decades ago.

Where does this leave the media players that used to skim all the profits?

Almost like a failed Bond villain.

(Photo: Pixabay.com)

Twitter finally makes a move

The new Super Follower feature from Twitter looks super interesting; the ability for a user to offer special perks to followers, who choose to pay a monthly fee.

One thing, we should immediately be asking ourselves: What took Twitter so long?

Tiered access and perks is nothing new at all. Lots of different services have had it for years. Dating sites is a great example, where it has long been the norm, you couldn’t contact someone and keep a conversation going, unless you were a paying member.

It should be a slam dunk for Twitter.

Unless of course, they blow this too.

There probably isn’t a big service out there, who have botched so many opportunities to develop their product and their business model as Twitter has. Anyone remember Vine which was TikTok before someone in China got that idea. Thought so.

I do however think there is a chance that Twitter will get it right this time. I don’t think you should underestimate the profound change that occurred when Twitter finally decided to kick the former US president to the curb for life.

It was a watershed moment. The lid came off the tube, and Twitter is in a different place now. So they should be able to do this.

For users it will also be interesting. From the looks of it, it will be super easy to create a Super Follower package, set a price and cater to the needs of that special paying audience. When you enable opportunity and make it dead simple for people to take it up for themselves, usage usually follows.

For media it will also be very interesting. Twitter just made it super easy for any user with some insight and expertise in something to create their own personal brand and get compensated for it. At the same time Twitter has a reach built into it that most media companies can only dream of.

I wouldn’t be surprised if this – or something like this – ends up being a preferred go-to-market plan for journalistic talent that would otherwise have chosen the more traditional media route. And that will in itself carry yet another branch to the bonfire of old medias imploding business model.

Interesting times.

PS. Big hattip to Prof G who saw this coming from a mile.

(Photo: Pixabay.com)

Just throw in the Xbox

…with Xbox Game Pass you not only get access to over 100 games, along with all of the other usual online services you might expect, but for an additional $10/month, you can get an Xbox Series S as well ($20/month for the more capable Series X)! Notice the framing there, which is the opposite of how I put it on Thursday: given the fact that consoles have always been an up-front purchase, the natural way to think about Microsoft’s monthly pricing option is that it is a 24-month installment plan for the $299 Series S or the $499 Series X, with Xbox Game Pass added on top. Given that Microsoft’s strategy is all about subscriptions, though, it makes sense to consider the console itself as the bundled benefit.

Ben Thompson, Stratechery, “2020 Bundles”

The idea about doing the subscription the other way round – first content, then device as an add-on – is brilliant.

I am seriously considering this, when it becomes available.

(Photo: Pixabay.com)

The real magic of Disney+

Disney+ launched in Denmark yesterday. By 6.45 AM I had it installed on 2 devices and our Apple TV at home. That’s how much I have been looking forward to the launch. And yes, I saw the first two episodes of “The Mandalorian”.

But aside from being a cool service in itself with an abundance of great content, Disney+ is also a big picture strategic masterstroke and a model to get inspired by for a lot of other companies.

Yes, they are late to the streaming game. But you could also say that they have had amble time to observe and learn from the competition and thus avoid the worst of the ‘early days’ diseases the firstmovers usually encounter.

On top of that the direct comparisons with Netflix, HBO and all the others are slightly flawed. Disney+ is so much more; it’s a direct avenue to increased merchandise sales and visits to their theme parks (where available and not taking into account the current Covid-19 restrictions, which – honestly – no one could have planned for).

The goal of Disney+ overall is not to win the streaming wars as I see it. It’s more of a clever way of driving awareness of and interest in the content universes themselves thus sparking increased demand for all the products sitting on shelves in retail stores, where Disney really makes their margins.

The price of 59 DKK per month – a little more than half of Netflix or HBO – supports this.

This is what Disney+ has that’s unique. Netflix doesn’t have that play, HBO doesn’t either and none of the other streaming players have it. Disney does. And it’s every bit as much a part of their core business model as the quality of their content is.

Having waited the streaming phenomenon out until there were some well established models that others have worked the kinks out of and THEN launch with the long tail of related products that no other player can match is a simple, beautiful strategic masterstroke you can only bow to.

It’s almost magic.

(Photo: Screenshot)

Go for subscription, Twitter

Twitter is reportedly exploring adding a subscription model to their offering.

Good for them!

However, they should go full throttle and turn Twitter into a full blown subscription product with no free tier.

Why?

First of all, my bet is that there is a great willingness to pay from those who see Twitter as a strong platform to communicate, get the message out there and be heard by those who needs to hear and get the insights. There are plenty of other niche examples of this. This goes for politicians, business executives, investors, NGOs of various sorts and media people.

Speaking of those, I think they would actually prefer for a lot of Twitter ‘users’ NOT to be present any more on the platform, which gives me reason number 2 why turning Twitter into a full blown subscription platform is a no-brainer.

Because after all; when was the last time when you heard someone truly relish a Twitter debate full of trolls?

I thought so.

If a lot of of the trolls and bots fell off a cliff and off the Twitter platform, when it turned full subscription, would that be a loss? Eeh, no.

So go, go, GO!, Jack Dorsey! Make it happen.

(Photo: Pixabay.com)

Insight is value

People inside and outside the media industry are starting to take notice of the value of quality content; content that people are actually willing to pay for.

Hooray! Better late than never, I guess. And yes, this goes out to you late bloomers in the media industry, who are finally getting around to the idea of getting your income – your livelihood – from other sources than an advertising market going towards a CPM of 0.

Yes, zero!

Anyways, it’s great that the focus is now on how to create content people are willing to pay for. But at the same time, I think it’s valid to mark a point of concern:

I see a lot – especially media people – looking towards popularity numbers to decide, which content is worth paying for, ie looking at page views and different engagement metrics to determine what they need more of in terms of increasing their ability to drive payment direct from users.

I think this concept is flawed. And let me back it up with a couple of examples:

I pay a monthly subscription to Stratechery by Ben Thompson and have done so for years. I pay a monthly subscription to Exponential View by Azeem Azhar. And the only magazine in print, I subscribe to is the Danish magazine on current political affairs, Raeson.

What do all these have in common for me as a paying user:

(1) I can never guess what they are going to put out based on prior history, and it’s perfectly fine, because…

(2) I subscribe for the insights and outcome. Nothing else. And I am willing to pay for that – and continue to do so.

The last point is important. I strongly – STRONGLY – believe that the key to a great content business – streaming services apart which is a totally different ballgame – is knowledge and insight. That you actually know and have a deep, DEEP expertise in whatever it is, you’re writing or even podcasting about.

And this is where the problem risks returning for the regular newsroom. Because in the effort of doing more with less, be fast and always be breaking, newsrooms have lost a lot of that knowledge and insight that was worth something.

At the same time the internet has enabled the sources to have their own voices and charge for that. They have effectively cut out the middle man.

Which is why – despite promising numbers for digital subscriptions – legacy media will find it just as hard to build a sustainable digital subscription business with what they have got than it was with advertising.

Of course I hope, I will be proven wrong.

(Photo: Pixabay.com)