Under the Radar

00:00:00 ◼   ► Welcome to Under the Radar, a show about independent iOS app

00:00:03 ◼   ► development.

00:00:04 ◼   ► I am Marco Arment

00:00:05 ◼   ► And I'm David Smith.

00:00:06 ◼   ► Under the Radar is usually not longer than 30 minutes,

00:00:08 ◼   ► so let's get started.

00:00:10 ◼   ► So the topic for today's episode is going to be, I guess,

00:00:15 ◼   ► subscription school with underscore,

00:00:17 ◼   ► and talking through some recent things

00:00:21 ◼   ► that I've learned in my understanding,

00:00:23 ◼   ► and the way that a subscription business works.

00:00:28 ◼   ► Now is the school itself subscription price and can I get a free trial?

00:00:31 ◼   ► I suppose everyone is on a free trial right now.

00:00:34 ◼   ► If you listen past five minutes we'll automatically bill you $25,000 for the year of school.

00:00:41 ◼   ► There you go.

00:00:41 ◼   ► Oh god, school is much more expensive than that now isn't it?

00:00:44 ◼   ► It is.

00:00:46 ◼   ► Thankfully under the radar is, so far at least, if there is a trial limit we haven't quite reached yet even if it's episode 260.

00:00:55 ◼   ► So, who knows? Maybe at some point we'll reach our trial image, but we have not gotten

00:00:59 ◼   ► there yet.

00:01:00 ◼   ► Yes, we – this podcast itself is not a very good business. Hopefully you'll learn some

00:01:06 ◼   ► lessons here to make your business better.

00:01:08 ◼   ► Yes. You need a better LTV than we have.

00:01:12 ◼   ► Yes.

00:01:13 ◼   ► But yes, so it's like subscriptions and I think what's interesting with subscriptions

00:01:17 ◼   ► is that they are – in this context, in the context of like a subscription as people sign

00:01:23 ◼   ► up, give you money, and then agree to give you money into the future.

00:01:28 ◼   ► And the kind of subscription model that we're talking about here is mostly going to be obviously

00:01:31 ◼   ► like app subscription, where there's some subscription inside of your app and you use

00:01:35 ◼   ► it and that's great.

00:01:36 ◼   ► But I think it applies to functionally to any kind of business where that's the case.

00:01:40 ◼   ► So it could be doesn't have to be just software subscriptions, but the general terms will

00:01:45 ◼   ► apply to that.

00:01:46 ◼   ► I think is increasingly becoming the predominant model for monetizing software applications.

00:01:54 ◼   ► You and I both use it in our applications.

00:01:57 ◼   ► It's increasingly just kind of becoming the norm and that is for a lot of really good

00:02:01 ◼   ► reasons that it provides a kind of consistent, reliable input stream to your business that

00:02:10 ◼   ► you can predict and plan for.

00:02:12 ◼   ► It lets you align the kind of value that people are receiving from your application with the

00:02:18 ◼   ► income you generate from it, which is great.

00:02:21 ◼   ► There's lots of things that are great about it, but the kind of logistics of subscriptions

00:02:27 ◼   ► are more complicated than, you know, if you go back to the kind of old, more classically

00:02:33 ◼   ► used paid-up front model, that was straightforward.

00:02:36 ◼   ► Like user gives you money, you give user app, and that's that.

00:02:40 ◼   ► There's no kind of ongoing calculations and predicting and forecasting and things that

00:02:45 ◼   ► you need to worry about.

00:02:47 ◼   ► The only thing you could really look at is like how many new purchases you have each

00:02:50 ◼   ► day.

00:02:51 ◼   ► Like that's really all there is.

00:02:52 ◼   ► And so, but with subscriptions, things get complicated.

00:02:56 ◼   ► And recently I've gone on a journey of this to try and better understand the kind of the

00:03:01 ◼   ► fundamentals behind subscriptions and to understand really what's going on there because I was

00:03:07 ◼   ► running into some weird issues. But before I get into my specific thing and the discoveries

00:03:13 ◼   ► I had, I think it's probably useful to just start off with just a quick overview of some

00:03:17 ◼   ► of the terms I'm going to use. Because unless you're coming into software development

00:03:23 ◼   ► from an MBA, a business background, or kind of that side of things, you may not be as

00:03:28 ◼   ► familiar with these terms. So just quickly run through what these terms are and what

00:03:32 ◼   ► they mean. So there's a subscriber. So a subscriber is a person who has signed up for

00:03:37 ◼   ► a subscription that is, you know, and then they've agreed to give you money on a regular

00:03:42 ◼   ► basis. You often will have something called a trial, which is an initial period where

00:03:48 ◼   ► someone will sign up for a subscription but not get billed until the trial duration has

00:03:53 ◼   ► elapsed. And related to that, you will have a trial conversion rate, which is the proportion

00:03:59 ◼   ► of your users who start a trial who then go on to actually make their first payment. So

00:04:05 ◼   ► So that's your trial conversion rate.

00:04:08 ◼   ► Following on to that, you have your retention rate or your churn rate.

00:04:12 ◼   ► And these are exactly the same things, just sort of one minus the percent the other way

00:04:17 ◼   ► around.

00:04:18 ◼   ► So the retention rate is the percent of people you keep at each renewal period.

00:04:23 ◼   ► And the churn rate is the percent of people that you lose at every subscription period.

00:04:28 ◼   ► Essentially, this is very much the kind of like cup half full, cup half empty kind of

00:04:32 ◼   ► a difference.

00:04:33 ◼   ► actual functional difference here. And these rates can be applied at various points in

00:04:39 ◼   ► a subscription. So you may have like your overall churn rate, which is kind of the average

00:04:44 ◼   ► of your various, at various renewal periods. Or you may say like, what's your first month

00:04:51 ◼   ► churn rate? What's your three month retention rate? These are just terms that you can do

00:04:56 ◼   ► to kind of look at the data in slightly different ways. But ultimately, you're just trying to

00:04:59 ◼   ► work out how many people are you keeping or how many people are losing, depending on which

00:05:03 ◼   ► side of it you're trying to understand. The next term is MRR or ARR, sometimes referred

00:05:10 ◼   ► to, which is monthly recurring revenue or annual recurring revenue.

00:05:14 ◼   ► It's not like a pirate thing. Arr. I'm sure a million people have made that joke

00:05:19 ◼   ► in various like growth hacking and marketing meetings in every app company everywhere.

00:05:24 ◼   ► I am pretty confident that is true. I think there is even actually a thing in this where

00:05:29 ◼   ► people refer to pirate metrics.

00:05:31 ◼   ► Oh no!

00:05:32 ◼   ► Where there's – it's like ARRR and retention rate. So ARRRR.

00:05:36 ◼   ► Oh no, I'm so sorry to the world.

00:05:42 ◼   ► Yes. So I've run into pirate metrics as a thing. But anyway, these are just – essentially

00:05:49 ◼   ► if you take how much money you could expect to make in a month based on your number of

00:05:55 ◼   ► subscribers and the amount of money that they're going to give you. And so this is just a way

00:06:00 ◼   ► to kind of predict what this is going to be. And the nice thing about MRR and ARR is they

00:06:06 ◼   ► tend to be somewhat predictable because they're based largely on the size of your subscriber

00:06:16 ◼   ► database. So you can sort of predict what these values are, and so they tend to be things

00:06:21 ◼   ► that are nice to use for forecasting and planning purposes.

00:06:27 ◼   ► The next is LTV, or long-term value. So this is how much income you will expect to receive

00:06:35 ◼   ► from a particular user over the lifetime of their use of the app or the lifetime of their

00:06:41 ◼   ► subscription. And typically, LTV values have some kind of a window to them, because obviously

00:06:48 ◼   ► you can't predict what is the long-term value of this customer on an infinite time scale.

00:06:56 ◼   ► That doesn't particularly make sense or is logical. So you'll tend to say something like,

00:07:00 ◼   ► on a 24-month time scale, how much income would you get from a user? What's the 24-month

00:07:04 ◼   ► LTV? So that's just something to keep in mind. And it's useful for getting a sense of how

00:07:10 ◼   ► valuable is a new subscription to you. Because while they may, you know, say you have a subscription

00:07:16 ◼   ► that's $1.99 a month, their value isn't $1.99, it's, you know, $1.99 plus the $1.99 times

00:07:25 ◼   ► essentially how many times the average user will renew. And so you kind of can do some

00:07:30 ◼   ► math to work that out. And that's useful for another metric, which is your CAC or your

00:07:36 ◼   ► AC, your consumer acquisition cost, which is if you have costs in order to acquire a

00:07:41 ◼   ► user, so say through advertising or affiliate marketing or some method of acquiring them

00:07:46 ◼   ► that costs you money, it's you can that is how much money you are spending to acquire

00:07:51 ◼   ► a user, which ideally you obviously would expect to be ideally less than the long term

00:07:55 ◼   ► value of that person so that you are making money rather than spending. If you're spending

00:08:00 ◼   ► $10 to acquire a user and they are worth $5 to you, you are losing money on every subscription.

00:08:07 ◼   ► So that's not a good place to be.

00:08:10 ◼   ► And lastly is just price.

00:08:13 ◼   ► It's just worth sort of mentioning that in all of these things, you tend to have some

00:08:16 ◼   ► kind of price that you assign to a subscription.

00:08:20 ◼   ► In Apple's case, then there's also the proceeds rate that will get applied to that.

00:08:24 ◼   ► And so your revenue or your proceeds is the thing that's actually valuable.

00:08:29 ◼   ► I think some people, depending on where you are, I know RevenueCat's MRR is before Apple's

00:08:34 ◼   ► cut, but I always think of MRR as the after Apple's cut version just because that's what

00:08:40 ◼   ► actually matters to me.

00:08:41 ◼   ► The fact that there's this bigger number that maybe if I was trying to put it in a pitch

00:08:46 ◼   ► deck and get funding or something would be useful, but for the purposes of what's actually

00:08:50 ◼   ► going to hit my bank account, I tend to think of MRR on a proceeds basis rather than on

00:08:55 ◼   ► kind of a gross basis.

00:08:56 ◼   ► Yeah, it's probably better to think – it's not good for your psychology and mental health

00:09:00 ◼   ► if you see how much Apple's making more frequently than you need to.

00:09:05 ◼   ► No. Yeah. And so that's – so hopefully that's a helpful kind of just like a quick

00:09:11 ◼   ► overview of the terms involved here because I definitely didn't know all of these when

00:09:15 ◼   ► I started and I would be reading something or hearing something talking about subscriptions

00:09:19 ◼   ► and these terms would come up and I didn't know what they meant. So hopefully as I kind

00:09:23 ◼   ► of dive into where I'm going from here, that's a good place to kind of lay the groundwork.

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00:11:07 ◼   ► of under the radar and all of Relay FM.

00:11:10 ◼   ► So the next thing that I want to talk about--

00:11:12 ◼   ► and this is the discovery that I made, which is not a new thing.

00:11:17 ◼   ► This is one of those, it's not, you know, I went on this long kind of journey of discovery

00:11:22 ◼   ► and ended up discovering that it's a well established body of work and is a very known

00:11:26 ◼   ► thing in subscription management, but I didn't know it. And so I'm sort of want to talk about

00:11:31 ◼   ► it here in case other people are in the same place. And this is sort of the concept. I

00:11:35 ◼   ► have heard many people refer to it as carrying capacity, which is an ecology term for, you

00:11:41 ◼   ► know, if you imagined, you know, sort of how many birds could live in a particular forest,

00:11:46 ◼   ► there's a limit to that where the resources of the forest can only support so many people

00:11:52 ◼   ► or so many birds. And in this case, in the context of subscriptions, it's this concept

00:11:56 ◼   ► of what was strange initially when you start a subscription business, the first, say, year,

00:12:02 ◼   ► which you will often see is this wonderful kind of growth in your revenue every month.

00:12:09 ◼   ► And it's delightful, I got to say. It just it feels super cool that the first, say you

00:12:14 ◼   ► had 100 new subscribers a day. That's your thing. So in the first month you're like,

00:12:22 ◼   ► "Wow, I have 100 subscribers." And then the next month, you know, I have, say, 190 subscribers.

00:12:27 ◼   ► Wow, that's 90. I'm increasing by 90. And then you go up again and again, and it feels

00:12:32 ◼   ► like your subscribers are always growing, and there's this wonderful growth period that

00:12:37 ◼   ► feels really awesome. And then what I was finding in my absence, specifically in Widgetsmith,

00:12:42 ◼   ► because it's now over two, it's like two and a quarter years old with a subscription.

00:12:47 ◼   ► Wow.

00:12:47 ◼   ► I'll get to it. Was it this? Yeah.

00:12:49 ◼   ► Time flies during a global pandemic.

00:12:51 ◼   ► It sure does. Yeah. But so it's like it's two and a quarter years old. And what I was running into,

00:12:59 ◼   ► and if you've been paying attention to Under the Radar for a while, I've been doing a lot of work

00:13:04 ◼   ► to try and increase my revenue from that app. I've been doing optimizations to my paywalls and

00:13:10 ◼   ► and changing things inside the app and moving features around and doing lots of work to

00:13:17 ◼   ► have it continue to grow. Because what I was finding is it was incredibly stable and anything

00:13:24 ◼   ► I did seemed to have almost no effect. I would make these changes, I would increase my conversion

00:13:31 ◼   ► rate and my paywall, increase my trial starts, and it was just not doing almost anything

00:13:37 ◼   ► to my overall, like, how much, you know, my MRR, my overall revenue that I could get,

00:13:41 ◼   ► and it was driving me crazy. Like, what is going on here? How am I, how is all this work

00:13:46 ◼   ► not actually translating? And so what I found, though, is that's like, okay, what I need

00:13:52 ◼   ► to do is I need to work out kind of modeling into the future what's going to happen if

00:13:58 ◼   ► I make improvements or changes to my app. And, you know, so I built the tool, and a

00:14:04 ◼   ► a little brief aside here. So I built this tool. It's this terrible little SwiftUI thing.

00:14:10 ◼   ► It works, but it's not great in any way. It was made purely for my own purposes. But because

00:14:15 ◼   ► you, under the radar listeners, are a special group of people, the world-exclusive URL to

00:14:20 ◼   ► download this tool, if you wanted to play with it, will be in the show notes for this

00:14:23 ◼   ► episode. This will be nowhere else. And if you want to try it and play with it, understand

00:14:27 ◼   ► you are doing so completely without warranty or any expectation of it working or being

00:14:32 ◼   ► accurate in any way, but because I like you and I want you to be able to play with it

00:14:36 ◼   ► while I'm having this conversation, it'll be in the show notes in case you do. But anyway,

00:14:41 ◼   ► so what I built is a tool –

00:14:42 ◼   ► It has a really great app icon, by the way.

00:14:44 ◼   ► It does. It's quite fun. Anyway, so I built this little tool, and what it does is it lets

00:14:50 ◼   ► me say, "Okay, how many subscribers do I have today? How much do I cost? What is my

00:14:56 ◼   ► price for my subscription? How many daily new trials do I have? How many of those trials

00:15:01 ◼   ► do I retain? And then what is the retention rate that I have in my first month, second

00:15:05 ◼   ► month, third month, fifth month, sixth month, and then sort of thereafter? And it'll draw

00:15:09 ◼   ► a graph showing what your subscriber base will be in the future. And the thing that

00:15:15 ◼   ► I discovered is that for a given set of those values, there is a ceiling, like a maximum

00:15:23 ◼   ► subscriber base that you can ever have, that you cannot grow beyond, which was very counter-intuitive

00:15:31 ◼   ► to me, that there is this sort of natural limit that you would think, well, it should

00:15:35 ◼   ► grow sort of indefinitely. But the reality, and this is the insight that wasn't intuitive

00:15:42 ◼   ► to me, but now that I see it, I can understand it, is sort of as you're going, every subscriber

00:15:48 ◼   ► you have will have a retention rate at some sort of applied to them, and it sort of continues

00:15:53 ◼   ► on in the future. And the longer you have a subscription in the market, at some point,

00:16:00 ◼   ► the weight and kind of the size of the existing subscriber base that you have. Even if you're

00:16:07 ◼   ► retaining most of them, like I think my long-term retention rate is like 95%, which feels pretty

00:16:13 ◼   ► good.

00:16:14 ◼   ► That's great, I think. I mean, that sounds amazing.

00:16:16 ◼   ► Yeah, I thought I had the same thing. It sounds great. But it meant that there is still a

00:16:19 ◼   ► limit where after two and a quarter years, retaining and losing 5% of those people starts

00:16:28 ◼   ► to dominate any amount of growth that I could get from new subscriptions. And you end up

00:16:34 ◼   ► with this ceiling. And you can see it in this tool. You put in your numbers, and it will

00:16:38 ◼   ► kind of show you where that limit is. And that was surprising. But it also was kind

00:16:45 ◼   ► of reassuring as I was going through this, because it meant that I wasn't losing my

00:16:50 ◼   ► mind and that all this effort I was doing wasn't actually making that much of an impact,

00:16:55 ◼   ► was, you know, the changes I was able to make were relatively small. You know, I could increase

00:17:00 ◼   ► my daily trials by 10% or 20% or something like that. And that feels like it should be

00:17:06 ◼   ► a meaningful change, like, wow, I'm getting 20%, you know, more people starting a trial

00:17:11 ◼   ► now than I used to. But the reality is, is like the weight of the existing people who

00:17:16 ◼   ► are subscribing, that is where, you know, that is what's determining my overall subscriber

00:17:21 ◼   ► base far more than any change that I could make in the short term. And so it's just

00:17:28 ◼   ► kind of an interesting difference. And I don't know if that would have been intuitive to

00:17:32 ◼   ► you, Marco, but it was definitely not intuitive to me that there would be a ceiling like this.

00:17:37 ◼   ► I mean, I've always seen my subscription revenue plateau off like this. I've never

00:17:44 ◼   ► really understood why it did that. I just kind of assumed, "Okay, that's just what

00:17:47 ◼   ► subscriptions naturally do.

00:17:49 ◼   ► And I mean, honestly, you see the same thing

00:17:52 ◼   ► with audiences, with things like how many people

00:17:54 ◼   ► listen to my podcasts, how many people subscribe to my blog,

00:17:59 ◼   ► or follow me on a social network.

00:18:02 ◼   ► I see the same pattern in all of those things,

00:18:05 ◼   ► which is when something first launches and is getting

00:18:08 ◼   ► traction or is first, for some reason, getting attention,

00:18:12 ◼   ► you see a nice upward movement.

00:18:15 ◼   ► and then it slowly curves off and seems to approach

00:18:20 ◼   ► a certain natural limit.

00:18:22 ◼   ► And then it just kind of stays there, ideally.

00:18:25 ◼   ► I mean, sometimes it goes down over time

00:18:26 ◼   ► if things aren't going super well.

00:18:28 ◼   ► But it just kind of stays in that kind of upper limit range

00:18:31 ◼   ► and never really gets to the next level,

00:18:35 ◼   ► the next order of magnitude,

00:18:36 ◼   ► or never doubles from that point or whatever.

00:18:39 ◼   ► And so it seems like this applies to pretty much anything

00:18:43 ◼   ► where you're kind of looking at ongoing attention

00:18:45 ◼   ► or ongoing money, where you do at some point, you know, you launch, you go up, and then

00:18:51 ◼   ► at some point the rate at which you're losing people or churn, you know, like the rate of

00:18:56 ◼   ► churn is at some point kind of keeps things in equilibrium with the rate of new people

00:19:03 ◼   ► coming in, and you just kind of, you have this kind of natural limit, or at least this

00:19:08 ◼   ► kind of range that you stay in, and it's very, very hard to ever break out of that unless

00:19:12 ◼   ► unless you have some kind of dramatic change in why people would come in in the first place.

00:19:18 ◼   ► And so this is how the total subscriber numbers or listener numbers or followers, this is

00:19:27 ◼   ► how it looks for everything I do.

00:19:29 ◼   ► Yeah. And I think that's, it's just interesting to me to confirm with math that that observed,

00:19:37 ◼   ► because I had the same observation, that it seems like you always end up in this steady

00:19:42 ◼   ► state and it's very hard to get out of.

00:19:44 ◼   ► And I think it's interesting to start to understand the math behind it.

00:19:49 ◼   ► And in some ways for me that was like a relief.

00:19:50 ◼   ► That was like, "Okay, so what it means is that for all I can, you know, I know the inputs

00:19:54 ◼   ► and I can determine what the output of those inputs would be.

00:19:58 ◼   ► So if I increase my daily trial starts by 10%, I can predict almost, you know, sort

00:20:03 ◼   ► of mathematically what the end result is going to be, what kind of a change that's going

00:20:08 ◼   ► to be, you know, is that where I should be putting my effort or should I be putting it

00:20:11 ◼   ► into retention, which one of those things is going to give me a bigger long term value.

00:20:17 ◼   ► And I think something here that's worth mentioning is the ACE, like my tool, which

00:20:22 ◼   ► you can, you know, I said, you're welcome to play with, will do this in a much more

00:20:26 ◼   ► detailed way where, you know, I let you break down this retention rates, you know, by the

00:20:30 ◼   ► first six months, and you can do input a bunch of different variables and try different models.

00:20:36 ◼   ► But a good equation, if you sort of want to left this conversation with a single equation

00:20:40 ◼   ► in your mind is that if you take the monthly subscription starts that you have and divide

00:20:48 ◼   ► that by your churn rate—so say you had 3,000 people start in a month, so you have about

00:20:54 ◼   ► 100 a day, and your churn rate was 25 percent. You know, 3,000 divided by 25 will give you

00:21:01 ◼   ► whatever your maximum—that is your ceiling. So in this case, it'd be like 12,000 is

00:21:08 ◼   ► number of subscribers that you would expect to be able to have. And that's just math. Like that is

00:21:13 ◼   ► just that version of it is very straightforward. And like, what my model is doing is make, you

00:21:19 ◼   ► know, sort of letting you tweak rather than just like one bundled churn rate, it's letting you

00:21:24 ◼   ► apply different churn rates to different cohorts, you know, so this is something that I see very

00:21:28 ◼   ► much in my own app that you have very different retention rates for different months, like my

00:21:33 ◼   ► My month one retention rate is about 65%, but my long-term one was 95%, which sort of

00:21:39 ◼   ► makes sense intuitively that there's a group of people who start the subscription, start

00:21:45 ◼   ► using it.

00:21:46 ◼   ► It's not for them.

00:21:47 ◼   ► They cancel it.

00:21:48 ◼   ► But if you've done that, if you have renewed your subscription for 7, 10, in this case,

00:21:54 ◼   ► some people that have been renewing for 24 months in a row, it's pretty likely you're

00:21:58 ◼   ► going to keep doing it at that point because clearly it's become a part of your workflow.

00:22:02 ◼   ► something that you find value in, and so it becomes useful.

00:22:11 ◼   ► If you wanted to just do a basic number, just take your monthly subscription starts, divide

00:22:14 ◼   ► it by your monthly churn, that'll get you in the ballpark.

00:22:17 ◼   ► Or if you want to get more detailed than that, you need to actually do some modeling to it.

00:22:24 ◼   ► But I think there is something just interesting about understanding that.

00:22:28 ◼   ► And I think what it means, once you get a sense of that formula, you start to understand.

00:22:31 ◼   ► So if you wanted to say double your number of subscribers, you mean to either have to

00:22:37 ◼   ► double the monthly subscription starts.

00:22:43 ◼   ► If you think of the equation, if you wanted to double the other side of it, you have to

00:22:46 ◼   ► double the numerator or half the denominator, essentially.

00:22:50 ◼   ► So you either have to half your turn rate or double your subscriber starts, which is

00:22:54 ◼   ► a pretty meaningful change if you wanted to end up in that kind of a place, going from

00:23:00 ◼   ► 100 daily trials to 200 daily trials is not going to be an easy thing to accomplish necessarily,

00:23:05 ◼   ► but that's the kind of thing that you would have to do in order to double the overall

00:23:10 ◼   ► subscriber count that you had at the end.

00:23:12 ◼   ► - Man, that's, I mean, it's good to actually have this be, like, you know, first of all,

00:23:19 ◼   ► codified and understood better, and it's good to have this tool to be able to plug in different

00:23:24 ◼   ► values easily and see it over time because I don't do a lot of very structured or calculated

00:23:32 ◼   ► growth hacking or revenue optimization or marketing really of any kind, to a fault I

00:23:41 ◼   ► would say.

00:23:43 ◼   ► And so whenever I do something or think something about like, "Hey, maybe I should do this

00:23:47 ◼   ► in my business," usually it's just kind of shooting from the hip and I just have

00:23:51 ◼   ► some kind of gut feeling or some kind of idea, "Oh, maybe I should try this." And it rarely

00:23:56 ◼   ► results in what I think will happen. Usually, my successes and failures, whatever they're

00:24:05 ◼   ► going to be, come as a surprise to me in both directions. And I think it's, again, it's

00:24:12 ◼   ► largely because I'm not really that interested in thinking in these analytical ways in a

00:24:19 ◼   ► lot of these topics. Like, it doesn't come naturally to me to think analytically about

00:24:22 ◼   ► business the way this does and the way you kind of need to if you're an indie sometimes.

00:24:28 ◼   ► And it's hard because some of these decisions are, I would say, difficult to – if you

00:24:34 ◼   ► have a – the standard indie mindset that I have most of the time, which is like, "I'm

00:24:40 ◼   ► just going to make a nice thing and the business will come." That – I mean, that does work

00:24:46 ◼   ► to a degree for a time sometimes, you know?

00:24:49 ◼   ► And so you can think that way and operate that way,

00:24:52 ◼   ► and in many cases, it'll work for you.

00:24:55 ◼   ► But in so many times where I've made some kind of small,

00:25:00 ◼   ► to me, tweak to the business model,

00:25:02 ◼   ► and then all of a sudden, my money goes way up or way down,

00:25:06 ◼   ► and it's like, oh man, I probably should be

00:25:10 ◼   ► putting more analysis and calculation

00:25:13 ◼   ► into some of these decisions.

00:25:15 ◼   ► So it's good to, first of all, it's good to have somebody like you in our space here

00:25:20 ◼   ► to be that person a lot of times when we aren't.

00:25:24 ◼   ► But it's also nice to have tools like this and concepts like this to know how to make

00:25:31 ◼   ► more analytical decisions and what to expect and kind of what's possible.

00:25:35 ◼   ► And so if I'm looking at this and I'm saying, "Hey, if I want to meaningfully get this

00:25:40 ◼   ► curve up or raise the ceiling here, I'm gonna have to get more people in the door in the

00:25:45 ◼   ► trial stage or in the download stage or whatever it ends up being. And that's difficult. That

00:25:54 ◼   ► might require paying for more search ads or paying for marketing somewhere. And that can

00:25:59 ◼   ► be very expensive and then I have to price that in. And it becomes so much more complicated.

00:26:05 ◼   ► But this is a way that people like us

00:26:08 ◼   ► need to think sometimes.

00:26:10 ◼   ► We need to be able to make these decisions

00:26:11 ◼   ► and be able to look at our businesses

00:26:13 ◼   ► and be able to make educated decisions

00:26:17 ◼   ► and have concrete goals and concrete expectations

00:26:21 ◼   ► that are somewhere in the ballpark of reality.

00:26:24 ◼   ► And so this really helps a lot to look at this

00:26:27 ◼   ► and to think like this.

00:26:28 ◼   ► - Yeah, and I think, I'm glad to hear it's helpful to you,

00:26:31 ◼   ► but it was something, I think for me,

00:26:33 ◼   ► I think what you're saying,

00:26:34 ◼   ► word that is most useful is making it an informed decision. Because I feel like so often, what

00:26:40 ◼   ► I end up doing is I take like the first two months, say of two or three months of data,

00:26:47 ◼   ► and then just like linearly extrapolate that data. And I'm like, wow, this is going to

00:26:51 ◼   ► be amazing. And I can start to like, you know, really invest in something or start to really

00:26:55 ◼   ► kind of go after something expecting it to just like grow indefinitely or kind of viewing

00:27:00 ◼   ► it in that way. And that's useful in some ways. But really what it's more helpful is,

00:27:05 ◼   ► in this case, it's like, understand, okay, given the first couple of months, or given

00:27:09 ◼   ► what kind of industry averages are, where could I expect at a given level? And what

00:27:17 ◼   ► does that mean? Especially, one of the most, sort of my favorite parts of being an indie

00:27:23 ◼   ► is that people will tell me and talk to me about when they go independent. They make

00:27:29 ◼   ► an app, they put it in the store, they think it's going well, and they decide, you know,

00:27:33 ◼   ► I'm going to quit my day job, and I'm going to go full time. And that's awesome. Like,

00:27:36 ◼   ► I love those stories. Anybody who's listening to this, if you ever go indie, let me know.

00:27:40 ◼   ► I love it. It's just like my greatest joy. But I also want to make sure that when you're

00:27:45 ◼   ► going when you're stepping out on the limb, if you're basing that on numbers, that those

00:27:49 ◼   ► numbers are firm, and realistic and reliable and predictable. And you're not doing what

00:27:54 ◼   ► I do and linearly extrapolate like two or three months and then expecting that to continue

00:27:58 ◼   ► to grow and kind of be good into the future. So my main thing here is just be thoughtful

00:28:04 ◼   ► about it, be understanding that there is some math behind it, there's some things going

00:28:08 ◼   ► on here that if you understand can be really helpful to you, can be really powerful as

00:28:13 ◼   ► a way to predict the future essentially. And then the great thing about subscriptions is

00:28:18 ◼   ► that they are kind of predictable. That you also can in the same way that if I say that

00:28:23 ◼   ► I have, you know, whatever, 1000 subscribers, and my daily trials goes to zero. Like you

00:28:28 ◼   ► can predict at your current churn rates, like what will happen and how much revenue you'll

00:28:33 ◼   ► have over a given period of time, which is lovely. Like it's one nice thing about subscriptions

00:28:38 ◼   ► is that they have this, you know, they're both resistant on the up, you know, that if

00:28:42 ◼   ► I make a change and make a 10% increase in the number of daily trials, it's kind of it

00:28:47 ◼   ► has a muted impact on my overall subscriber count. But the great thing is it goes the

00:28:51 ◼   ► the other way. If I have a 10% reduction, there's also kind of a muted, immediate

00:28:56 ◼   ► impact on that. And so that's why we love them so much, and it's why I think I will

00:29:00 ◼   ► continue to use them as my primary monetization scheme going forward.

00:29:04 ◼   ► Yeah. Frankly, I love subscriptions. It matches what we actually need from the business, as

00:29:11 ◼   ► you were saying at the beginning of the episode. Subscriptions give you recurring revenue so

00:29:16 ◼   ► that you can keep developing the app on an ongoing basis, which is what everybody expects

00:29:20 ◼   ► from apps these days anyway. So it's a great business to be in and it's really nice to

00:29:25 ◼   ► be able to understand it better.

00:29:26 ◼   ► And that's probably a good place to conclude subscription school with Underscore today.

00:29:30 ◼   ► And I think it's probably one thing I just wanted to quickly mention before we wrap up,

00:29:33 ◼   ► is that I think Marco and I now are almost exclusively on Mastodon, so we'll have links

00:29:37 ◼   ► to our Mastodon accounts there. So if you wanted to follow up or understand kind of

00:29:42 ◼   ► what we're going on, what we're working on in between the two weeks that we're here,

00:29:45 ◼   ► that's the place to do it, rather than other places that are no longer.

00:29:50 ◼   ► Yeah, there's no almost about it. I'm exclusively there.

00:29:53 ◼   ► Yeah.

00:29:54 ◼   ► All right. Thanks for listening, everybody, and we'll talk to you in two weeks.

00:29:57 ◼   ► Bye.

00:29:58 ◼   ► [ Silence ]