It seems as if a number of factors are converging that make a subscription economy the most likely model for the future.
For some years now, the software industry has been promoting the subscription economy, and with good, solid reason. Cloud billing vendors, such as Cerillion and Zuora, have been saying that the solution to the upgrade/software release problem is by buying software as a service. Many customers have agreed and come on board even though there are problems that remain with cloud based services – not least security issues – which are holding people back.
At a consumer level, the seismic shift in the established internet model, where the advertising funded free internet is shuddering to a halt also points towards fresh thinking. Big tech plundering our data, and advertising that is irritating rather than useful has turned many people into internet and social media critics.
Online advertising is now growing at its slowest rate since the dot com bust in 2001 and is set to give way to traditional advertising – cinema, bill board and poster – for the first time in two decades.
Because brands, too, are sick of the way that online advertising is no longer promoting their brands but is now in danger of damaging them.
Now, more and more people are using ad blockers and as a result of that advertising suffers – again.
The situation is so bad – if you are in the online advertising industry – that browsers are emerging that use a subscription model. Brave is one high profile example.
Google is following suit, and working out how to hold onto customers and how to attract new customers. And the answer is to create an offering that has no advertising – or very little – as a differentiator.
Gaming is following suit. Last week Google started to pilot their new subscription based PlayPass, which allows access to hundreds of premium apps and games for a small monthly fee. The other big tech game and content players are trialling or launching similar subscription based services.
Tencent, although posting excellent results, points to tough times ahead for their gaming and related advertising business, which was down almost 10% this quarter.
Of course, subscription does not simply mean a monthly fee, end of story. Companies are becoming extremely creative with rewards and ‘free’ subscriptions – normally if users promote or recommend their service, or if they are champions at the game in question.
This trend is reflected in how games, music and other content is launched. It is changing from a Hollywood style approach – much trumpeting, press conferences, bill boards etc – to a Silicon Valley approach, where games just appear – and are monster successes. Think Fortnite.
This shift towards a subscription economy might not be the end of advertising. But now that consumers and consumer brands are catching on to the advertising push back it is having an effect.
Let us hope that the advertising industry wakes up in time to see this as a chance to reset itself. Otherwise it might be the end of advertising as we know it.