Ads are everywhere. You cannot watch a video on YouTube these days without first watching an ad. The same has been true for years about watching television as well. A majority of content experiences are plagued with interruptive ads.
While people may not like ads, they do serve a purpose. A large number of popular mobile apps remain sustainable because they make money off the ads they show. Ad monetization is a bitter pill end users have been swallowing for years. In newspapers and magazines, and now on mobile apps, ads are a direct way to make money.
Ads still remain relevant because very few other channels of app monetization offer the same level of simplicity and pay-off.
However, the popularity of the subscription model is changing things up.
The subscription model is slowly usurping ad monetization as the best way to make money with apps. The success of platforms like Netflix and Spotify only underlines the fact that subscriptions can in fact work.
You may naturally want to switch over and offer subscriptions to your app users and customers. However, switching monetization models is not just a matter of removing ads and offering subscriptions. There are many other factors you need to consider.
The piece covers five points you should consider when switching from ad monetization to subscription model.
#1 - What do you offer?
When you ask someone to buy a paid subscription plan, you need to offer something unique. Simply providing an ad-free experience is not going to be enough.
If the choice is between paying for a subscription and watching ads, most users will prefer the latter.
This is the main challenge of a subscription model. An ad monetization model partly works because people get to use your app for free. You thus don’t need to think about providing cutting-edge premium features and experience because your app is free.
The same cannot be said when you are charging your users money. The features you have, the service you provide, and the overall experience you deliver have to be on point.
The mistake many app companies make is offer the same services they earlier did when their app was free. This causes a disconnect with the app users because they are used to paying nothing for the same service.
Let’s take an example and assume you have a pharmacy app. You publish ads on your platform because you still don’t have enough users to live without ad money. When you launch a subscription plan to offer customers an ad-free experience, you should also offer other services such as free shipping or fast delivery. These premium services will help you get more subscribers.
#2 - Identify the ideal price point
Price is very important to actually make your switch to a subscription model a success. A high price point can alienate you from your target audience. Giving out subscriptions at a low price defeats the purpose of switching to a different monetization model.
The ideal price point is one which hits the sweet spot between too expensive and dirt cheap. How can you find such a price point?
This is the part where you need to delve into research. A simple way to determine an optimal price point is to calculate how much extra money your customers will have to spend by not buying your subscription.
Let’s take an example and assume you launch a shopping app built with a free online app maker. You have a subscription plan that offers users free shipping and fast delivery. Calculate the exact amount an average customer would save on free shipping. This would give you a good idea of what your subscription is actually worth.
It is not possible to follow the same process to evaluate the subscription of a content-based app or even a gaming app. This is where it is wise to look at other apps similar to your own. Compare their products and services with your own and set an appropriate price point.
#3 - Don’t offer too many options
Offering two many subscription plans is a bad idea. The last thing you want potential customers to do is calculate which plan costs them more.
More often than not, offering no choice is the best choice. Make a list of all the subscription plans you want to offer and their different variants. Select the subscription plan you think most customers would choose anyway. This is the only plan you need to offer.
Offering options when it comes to products and services is great. However, the same is not true when we speak of subscription plans. You need to make it easy for your customers to select a subscription plan.
This approach is ideal if you plan on offering subscriptions for a blogging or shopping app. This is because both these spaces have less variants than usual and can be thus boiled down to one subscription plan.
Such an approach may not be feasible if the services you offer have many variants.
#4 - Setup customer service
You have to set up a customer service channel when you decide to offer subscriptions. There will always be people who are unhappy with the service they get. You need to offer such customers a forum to air their grievances.
Anyone running a shopping app would understand the importance of customer service. Many app makers these days allow users to provide customer support through their apps. For instance, if you’ve gone from WooCommerce to mobile app for Android and iOS with AppMySite, you can easily provide email and call support.
If you don’t solve your customers’ problems, they will turn to more public forums to call you out. This will inevitably lead to a collapse in brand value and perception.
#5 - A plan for non-subscribers
Let’s say you decide to ditch ad monetization and instead offer subscriptions. You cannot seriously assume that every customer of yours will become a subscriber. This raises the question - what is your play for non-subscribers?
Firstly, you cannot make your app a subscriber-only platform like Netflix overnight. You have to accommodate users and customers who don’t want to take up a subscription plan of yours.
One simple way to approach this challenge is to continue serving ads to non-subscribers. This sounds good in theory, but many of your users would still prefer watching ads rather than paying.
A more novel way to approach this challenge is offering premium services to all users for a fixed period of time. Let’s again assume you want to ditch ad monetization. First, remove ads from your platform and provide all the unique services you plan to bring with your subscription model. Let your users enjoy these services without a care in the world.
Then, you take them back to the previous version and tell them to subscribe in order to continue enjoying the premium services. Since your customers now have a taste for your premium services, they are more likely to subscribe.
In conclusion
There is a lot of competition in the app space for attention and eyeballs. Part of the reason behind this is the simplification of app development. Anyone can convert WordPress to Android & iOS app with tools like AppMySite. Making money with an app is much more of a challenge than even before.
This piece provides complete guidance on all the things you need to consider when switching from ad monetization to subscriptions. There is much more literature you should refer to before making the switch. The points made here should set you on the right path.