The FAANG companies – Facebook, Apple, Amazon, Netflix and Google – often lead the way towards newer technological paradigms that become the default after some time. These FAANG businesses are now doubling down on subscriptions, and that tells us that the subscription industry is about to break into the big league.
The world’s most valuable tech companies Facebook, Apple, Amazon, Netflix and Google serve as a good compass to followin the technology world. These companies are often flagbearers of the next big technology trend whocan bring it right into the mainstream. While we have long espoused the benefits of the subscription model, recent developments indicate that FAANG companies are increasingly looking at subscriptions to power their next phase of growth. This offers a good direction for smaller businesses who are evaluating the subscription business model for their own products and services.
Apple: From hardware to services
Many people think of Apple as a hardware (devices) company, but that positioning may all bechanging this year. In its aptly named ‘Show Time’ event, Apple recently showcased its new subscription offerings – news service Apple News+, SVOD service Apple TV+and game streaming service Apple Arcade. In fact, Apple already brought in $10 billion of revenue
through its services in the fourth quarter of 2018, and it is likely that we will see this number going up in 2019. Last year, Apple also started reporting Services Gross Margin in its earnings report which indicates that this metric is becoming increasingly important for the companyand its shareholders.
Apple is feeling the pressure of slowinghardware sales and a growing reluctance from other companies to handover 30% commission for in-app subscriptions. Recognising this, the new subscription services may have come just at the right time for Apple. While Apple’s excellence in hardware is unquestionable, it may have a tougher time breaking through in the subscription space with well-entrenched incumbents in news, video streaming and gaming. However, Apple’s focus on design, close attention to detail and habit for consistency make it a worthy competitor even if it is entering the market late, and is something that new subscription businesses can certainly learn from.
Amazon: Leading the way with the world’s most diversified subscription bundle
Talk about offering bang for buck and nothing comes close to Amazon Prime – possibly the world’s most diversified subscription bundle. Subscribers get access to free, fast & cheap deliveries, music streaming, video streaming, Prime Reading and an ever-expanding list of services. The value proposition is so incredible that Amazon Prime has quickly become one of the company’s most profitable services – generating a big chunk of the $10 billion subscription revenue
in 2018 and offering a launchpad for cross-selling other products.
Amazon Prime is perhaps the only subscription bundle that can compete in so many areas – video, music and delivery – all at once. The company keeps adding Prime benefits with its new products and services such as Whole Foods, Kindle and Echo. In fact, Amazon offers a significant lesson to new subscription businesses – keep offering value to subscribers, almost obsessively, and they will happily keep paying you the subscription dollars.
Netflix: The Subscription Pioneer
If any company can claim to be the king of the subscription industry, it is Netflix. The company was the first big name to truly showcase the power of the subscription industry with its video streaming service. The company has constantly innovated on all its core strengths – content, technology and monetisation – to offer a seamless experience to subscribers. Crucially, Netflix offers one of the least obtrusive subscription experiences to its customers, removing significant friction from the payments process.
Perhaps it’s down to Netflix’s ability to spot future trends faster than its rivals? It pivoted quickly from DVD sales and rentals to video streaming much before the other tech giants even started thinking about it. Netflix has also successfully created its own original content in an industry which was previously dominated by big budget studios. Netflix has designed the quintessential subscription experience by keeping customers at the forefront. An eye for the future – that’s what new subscription businesses can learn from Netflix.
Google: Sees the Potential
In our subscription roundup last month, we reported on the launch of Google Stadia - the company’s new game streaming platform. Whilst the full details of the service are not yet out, this seems to be another sign that the company is serious about subscriptions following the introduction of YouTube’s new subscription offerings – YouTube Premium and Music Premium. Google has also been helping publishers with paid subscription tools.
While Google may not have gone all in on subscriptions yet, Stadia may be the company’s way of harnessing the potential of the subscription industry. Google offers an important lesson in thinking big and solving problems at scale for new subscription businesses.
Facebook: Dipping the Toes
Among the FAANG companies, Facebook is the company with the least exposure to subscriptions. However, that can change very quickly since Facebook has something other companies on the list do not – Network Effects
. If it does launch a subscription product, it is likely that users may take to it very quickly as it becomes widespread across the social network. Facebook has reportedly already been working with news publishers to roll out paid subscriptions.
With Google and Facebook both being advertising-based companies, perhaps their core business does not naturally lend itself to direct subscriptions. However, Facebook has hinted that it may look at subscriptions as a possible area of growth. For a new company starting out, building a customer baseand focusing on user experience are the biggest lessons to take home from Facebook.
Subscriptions: The Common Thread Among FAANG
All these businesses have built a strong tech culture, and they often lead the way for smaller businesses. Each has their own unique way of approaching subscriptions and new entrants could do well to learn more from the FAANG companies. Adopting their strategies can be a good way to hack growth, as long as you can tailor these best practices to your business.
We help businesses make the most of the subscription model through our recurring billing platform. Contact us today to learn more.