Passive Income: Subscription model business or bust. | Hacker News Reader

Passive Income: Subscription model business or bust.

spencerfry.com

35 pointsmaxstoller13 comments

This article glosses a very important piece of subscription revenue - churn. Just because a customer paid last month doesn't mean they'll pay this month. This is why it's important to understand "Lifetime Value", i.e. customer lifetime X subscription price.

It turns out that high LTV is correlated closely with high customer acquisition cost. That means getting people to convert to your service is -hard-. I'm surprised this isn't mentioned in the "disadvantages" part.

I also think it's silly to write an article on subscriptions as a business model and then mention examples that don't use subscriptions at all.

I think his main point was that producing a product that people want as opposed to a non-scaling service is the way to go for financial security.

I think he might have just gone with subscriptions in his examples because it's the best understood way to make money online since it's obvious who is getting paid and when. This is in contrast to ad-based, virtual-goods, or skimming off transactions.

The article as a whole was a bit short, generalized and simplistic for my liking.

My advice: Find a niche open source project that can be hosted, and become a contributor and an expert on it. Then offer premium hosting and support. It doesn't have to be a recent project either. The one I'm doing is still using CVS for version control.

Very interesting. So how is it working? Are you paying the mortgage yet? How do you get new subs?

I am trying something very similar in GPS tracking space

Seems like a very superficial article, not much meat, especially considering it's such a potentially interesting topic. Shame, I think there were better articles on this blog before.

I agree with most of the content of the article but the term passive income always bothers me, running both styles of businesses right now (subscription and ad firm) I can tell you that neither of them feels very passive.

Yes, exactly. We hear WooThemes has a great bussiness, but I doubt maintaning such a site is a passive income...it must be lotta work to do it. In my humble opinion, passive income is for example when you developed a set of websites, with steady SE traffic, and you monetize the pageviews by ads, doing nothing after the site was created. Actually I am starting to do that and so far it seems to work. ;)

Headline only. This isn't going to help you start a submod business.

He grossly overstates the stability of subscriptions and their predictability. They _can_ be more stable than advertising revenue when faced with some kinds of disruptive factors... anyway, written from the grass-is-greener-on-the-other-side-of-the-fence perspective of someone who hasn't been there.

Spencer Fry, I'm sure, has been there, given that carbonmade is a subscription model business. I don't disagree with what you're saying, but I just wanted to point out that this article isn't from someone with no experience at all on the subject. (Apologies if you were referring to yourself - the comment is a bit ambiguous in that regard)

"You don't want to rest on your laurels, but it's likely that you're never going to take in less revenue next month than you did the previous one."

Bull. If that were true then companies that charge subscriptions would never go out of business. Also as Teej said, his examples are horrible. Zynga is not a subscription business by any means. Apparently he is not aware that charging for products does not equal being a subscription model business.

Read the article.

I'm talking about passive income. Every virtual good Zynga creates needs to be made one time and then can be sold many times. It's passive in that sense.

I used subscription models as one example, because I'm most familiar with that, but selling virtual goods and selling themes are also ways of making passive income.

Thanks for the clarification, that makes more sense.

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