A Note on Linkedin like subscriptions

I am a premium member on linkedin, and have been pretty active this month. This resulted in a nasty surprise today.

Today, Linkedin suggested that my activity is reaching "commercial level" of usage, and therefore i cannot search more unless i update to the next level on my monthly subscription.

The entire tech industry is working like a big classroom, where one solution is being copied endlessly by everyone. A decade ago, everyone was selling Software, and now every one is intent on selling subscriptions to help their top line. This is making companies make mistakes and ignore the bigger picture.

Strengths of a subscription based model

There are very simple reasons why any corporation wants to go into subscription based model

- Making sure that the income is steady and predictable

- Higher price can be charged on the whole, over a year, once price is converted to Byte sized amount. This is same as taking an instalment for a loan.

- The pricing can be flexible and can be easily changed for the exact same product and affected on a monthly basis. This means inflation can immediately be built into the price, rather than waiting for the next version of the product or going into a complex real world price changes.

Issues with subscription based models

But there are some issues, and they are more from Customer centric perspective

- The biggest being that customers do realize that they are paying more than they should.

- Inadvertently an organization on subscription model starts competing with random companies for the same share of customers wallet. Let me explain this phenomenon a little bit more.

- A company might delude in thinking that they are just charging 7 dollars a month, but a customer knows that he/she is paying a pile of 7 dollars every month.

- A customer is constantly evaluating his/her purchase decision on a monthly basis, and a call to opt out of subscription has a long effect.

Customers are making purchasing decisions every month : BAD

Suppose you bought linkedin as a lone standing product with a yearly subscription paid out once. In such a scenario, you would have made the decision to pay once. It would have been similar to deciding to purchase a car. But now that you are paying it every month, you are thinking of its viability every month.

This is bad for business. This means that even though the service might look affordable, you are constantly evaluating it and that leaves no margin for mistake, plus requires you to be useful + Cost effective every single month.

One can always argue for a premium pricing with better service, but with technology and technology products getting commoditised, this differentiation is getting harder and harder to achieve.

A Service ends up competing on product AND share of wallet.

Also now a service like linkedin would be competing with my netflix subscription, spotify subscription, car payments, rent, cable subscriptions, phone bills, Onedrive subscription, magazine subscriptions and virtually everything that i pay for every month.

If i had paid once, there was nothing that i could have done. But now if on a particular month, i want to cut down on the expenses, i can do so by unsubscribing. Think for a minute, what would happen. Which service would get the boot.

Also, with the low cost of exit from a subscription, if i have dropbox subscription, i may not go ahead and buy any other storage service. At least not in that particular month. So a company has my loyalty, but only till they are price competitive and don't make mistakes.

Acquisition costs are real, but no lock-in guarantee on retention

Which means dropbox has me till Microsoft doesn't lower the price on one drive. In such an economy, cost of customer acquisition is real without substantial control on customer retention. The lock in period is just 4 weeks.

You can't compete against free

In a bullish economy with flaky customers, there would be a VC fund out there willing to invest in a new start-up and there would be a service who would give what you are doing for free or at lower price to get your customers. If its not happening right now, means that there are other problems being solved.

Think of it in this way, Whats stopping Facebook (free service) from starting a linkedin kind of a service? Nothing actually.

If facebook does launch a free service, how much runway do you have with a subscription model? May be a couple of months. But with a licence based product like Windows, microsoft has been able to reiterate and find out ways to keep growing.

If facebook is the exact same platform and can be free, why should we be paying for linkedin?

Suggestion? 

As far as on my premium subscription, i immediately cancelled it, as the same search functionality is provided by google.

The suggestion? Right now the premium subscription is more of a tax on the money that you are going to make than an actual charge for value. Premium subscription is not costing linkedin any substantial spend.

So if you want to charge subscription, there has to be an actual difference in value than a tax over my profit.

Also keeping a subscription price comparative to more essential services doesn't make sense. If the prices are high due to lower conversion, and few are paying for many, then linkedin should make sure that they sell to the bottom of the pyramid at even lower prices.

Conclusions

If linkedin was advertisement free, i would have been happy to pay and bear the cost for some free users. I recently checked linkedin ad rates and they are charging around 80 rupees CPC. Then it doesn't make sense. Above all, search is a prime feature on any website, and the thought of putting a price on it, that too to UPSELL you to the next level seems a lot more customer negative. That was the whole point. Linkedin is playing like a monopoly, and i think the time is ripe for FB or others to jump in and increase the competition.

Would love to hear your views