Subscription economy trends - things are looking up

Peggy suggests that consumers' appetite for subscriptions will likely continue to develop despite a looming recession. Subscriptions account for 82% of revenue generated on average by non-gaming apps. In the U.S., annual spending on top subscription apps in the Apple App Store increased by a third over a year, reaching $6 billion in 2021; revenues on Google Play rose 78% to $2.5 billion the same year. In Q2 2022, 400 apps generated more than $1 million in consumer spending on the U.S. App Store, 8 times the total from Q1 2016.

What's in it for consumers?

Subscription services offer lower barriers to entry, letting consumers minimize costs for the same or better return, and flexibly downgrade or upgrade. They offer convenience to purchase, removing the hassle of remembering or searching what to buy each time. And they offer access to novel and curated content, unlike one-time payment models, which usually guarantee little to no product updates.

What's in it for apps?

App businesses benefit from the subscription model from two perspectives: monetization and security. Delivering products on a subscription basis taps into consumers' daily habits, evolving from a one-time deal into a lifestyle companion, translating into a predictable stream of revenue and stronger subscriber stickiness. Streaming services show how user habits provide security: during the pandemic, millions signed up and built daily or weekly habits that outlasted the initial trigger. A survey by United Talent Agency found 67% of surveyed U.S. consumers plan to continue spending more time consuming entertainment than before COVID-19.

Challenges for subscription apps and how to rise above them

One of the most notorious challenges is subscription fatigue, a state of exhaustion and irritation customers feel when frequently subscribed to new services. Peggy recommends three strategies: (1) provide continuous value and content, refreshing, curating, and recommending content, and constantly answering "why do I need this app now?"; (2) connect with customers by understanding their behaviors and expectations through data-driven insights on the in-app journey; and (3) communicate the value repeatedly, on the right channels at the right time, with a highly personal approach.

Peggy's pick of an app that delivers all of these winning strategies is Spotify, which nurtures continuous user habits and successful retention by building a hyper-personalized value proposition, actively monitoring listening data, delivering personalized recommendations that evolve with preferences, and making its call to action a gateway to continuous value rather than a payment screen. Peggy suggests Spotify has gone from being a subscription service to a daily companion because it helps people build habits and emotions around how and why they use the app.

More about Peggy Anne Salz

As chief analyst and founder of MobileGroove, a top 50 ranked destination providing analysis, custom research, and strategic content marketing to the global mobile industry, Peggy Anne Salz is recognized as one of the leading experts shaping the mobile world. She is a nine-time author and frequent Forbes contributor, and is also Chief Content Officer of MMA Germany.

Episode 14 sneak peek

• On the subscription economy: "At the end of the day, we have this habit, we have this behaviour of needing music, entertainment. First, it was to maybe brighten up our days in lockdown, and now it's just part of our routine."
• On value delivery: "If an app cannot deliver on its promise to provide continuous value and content, the subscription model will not work."
• On Spotify: "What I like is that it's more a companion now than it was before. It's gone from being a service, a subscription service, to being a companion."
• On subscription fatigue: "Subscriptions are competing with one another for that scarce resource, our attention. So our mind share, our wallet share, heart share."
• On valuegraphics: "Valuegraphics is a third data set that is about what people value. You have your demographics, you have your psychographics, and now valuegraphics on top of all of that. What matters to us matters to us, that's why."