🟢 The conflicting business model of subscription

Philippe MEDA -

After the recent series on the state of the GAFAMs in 2023, I wasn't planning on going back to discuss their strategies anytime soon. But here I am again as I was taken flat-footed by Facebook's (and Instagram's) announcement of offering a subscription model for $12 a month in exchange for a blue verification mark – $11.99 on the web and $14.99 on mobile, to be precise. OK, the move seems obvious. Zuckerberg is following up on Musk with a grand strategy, probably code-named "Why The Hell Not?" to try and grab some more money.

It's not so simple and does elicit quite a few remarks about what subscriptions are as a business model.

Here we go:

The deal with subscriptions

First of all, it seems necessary to remind us why subscriptions exist. The core idea is that you will pay at a fixed frequency for an ongoing service. And there can be quite a few types of rationales around this transaction:

  1. The service can have a constant value, and by subscribing, you commit to being a long-term paying customer in exchange for a discount on the total value (this is the printed press model of yore).
  2. The service is a portfolio of bundled offers that you can consume as a super-user at your leisure in exchange for committing to a regular payment (think of it as a buffet).
  3. The service is accessible to anyone already paying for it, but by subscribing for an extra, you get a premium service (think VIP pass in various consumer markets).

We could go on with half a dozen more nuances, but essentially, subscriptions end up being about offering some customers a clear value at a discount in exchange for their long-term commitment. And, if, on the surface, it seems that Facebook is offering a VIP subscription (mode 3.) for its platform, it doesn't work.