Thread

Like many here, the way 37 Signals has promoted the subscription based approach to application development has made me a believer of that model. They weren’t the first, but they have really explored the concept and ignited public discussion of it amongst developers.

So as I brainstorm ideas for subscription models, I have a new question that pops into my mind all the time and I’m trying to use it to help “find” the need. The question is this ...

In an economy where people and companies will want to shave back expenses more and more, does the subscription model help or hinder prospective users?

I’m probably the cheapest guy I know when it comes to “work expenses”. I like my Blackberry but that $50 a month for the data plan has me wishing I didn’t have a Balckberry and it’s contract! And while I spare no expense for my toys (when I can afford them), as a consumer I’m still majorly turned off at the idea of any recurring payments system. I simply do not sign up for them.

So in your opinion, is the subscription model still as viable and if yes ... what kind of consumers are we talking about? I assume still B2B, as B2C seems like a much harder program.

Example ... people love Facebook and MySpace ... but if they had to pay every month to use them, my bet is they would think twice.

Basecamp, yours for only 120 easy payments of $150 (12 months * 10 year estimated application lifetime). I mean, how could I refuse an offer like that? Oh wait, that’s $18,000!

But for my opinion on the question: Consumers can afford to be cheap, businesses can’t. If a service offers value (saves more $ than it costs), then I think it’s safe.

IMO, subscriptions are fine for services (like hosting) where there is ongoing support. Basecamp is a service and an application. I think the basecamp application is worth no more than $300 total (comparing to ActiveCollab). So they are really charging a premium for hosting service.

Businesses can afford to be thrifty though ... and your Basecamp example is a perfect one.

If you use subscription access to your site you would have to offer something useful,  Most people won’t pay and will get frustrated and leave your site. There is very few things people will get out there dough for one it comes to digital goods.

Some of these things are probably.

*ringtones
*porn
*Support (think experts-exchange.com)

If you are running a business with a decent amount of income, you can afford to increase your overhead slightly. It’s all about compromise, and making sure that a.) the product you are going to invest in will increase productivity of the business and b.) that the product itself is robust and secure, with good support.

You just have to think steps through.