My favorite form of revenue is reccurring subscription revenue. Why?
- Passive income – This means you can be sitting on a beach or sleeping and your income stream does not change.
- Snowball Effect – Reccurring subscriptions add up fast! Once you implement subscriptions I guarantee soon after you will be kicking yourself that you did not implement them earlier. I know I was after I first implemented them on some sites. The snowball effect is pretty easy to understand. Basically since they are auto renewing – as you gain new customers the reccurring subscriptions are also coming in thus making a huge pile of cash for you.
- Easy to Implement – PayPal makes it amazingly easy to implement a recurring subscription.
OK so easy right? Well not that easy……. there are several things you need to think about before you throw up the subscribe now button.
Price Point – 10, 20, 30$ what is the right price point? This is something you are going to need to do some research on. Price points are something that have always intrigued me because its really amazing how it works.
In the book Pinpoint Pricing They do a study of pricepoints for an e-book. Whle this is not a subscription you can still learn a lot from it. In 2006 they conducted a 4-week AdWords split test for a new eBook. They tried $19, $29, and $39 for there e-book. Here is there results:
They go on to say:
We believe that the 19$ Price Point lowered customer perception of the books value and lots some sales. At 39$, the book was perceived as too expensive by some customers. 29$ was the “safe price. However, note that the 39$ price point generates more revenue, even with 22% fewer orders.
Since they were not trying to build a volume of readership for this ebook they recommended a 39$ price point. This is important to note because with forum or website it might be more important for you to get more users then to get a 1 time sale because the users will be coming back and might click on your Contextual Ads or pay for other services you have.
Subscription Length – 1 week? 1 month? 6 months? 1 year? Again another thing you are going to want to do research on. This really depends on the service. In writing this many examples came into my head but its hard to put them into writing. I guess the point is this – you want to lock people into the longest terms possible. Annual and bi-annual subscriptions I have found really kick ass but also take into account the higher cost of a long term subscription may not allow some people to participate. Longer term, higher priced subscriptions will also be better on your bottom line because of fees.
Terms Of Service - Always be very clear what the user is getting in their terms of service. From a money perspective you want to throw as many features as possible in the terms of service that a customer will be receiving but from a legal side you want to be as brief as possible. Anything you put in here you are going to have to provide and by being too specific you could be limiting yourself for growth.
My experiences – Most of my subscription revenue is from forums. I have tried literally 20 different price points and different lengths of time. I have found the sweet spot for me is 19.95 every 6 months. For terms of service I basically offer nothing I know I might not deliver. I refer to these as donation based subscription services. This means you are not guaranteeing crap.
So if you are not using subscriptions and you are sitting there saying to yourself, “Well nobody would sign up for a donation based reoccouring subscription on my site” and maybe you are right…. or maybe not =P
Anyway just some thoughts I had on subscription based revenue.
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It is all about finding the break-even point. What price will I recover my costs.
One thing you forgot to add, Shoemoney is that it only works for established/popular sites.
This model will not work for a 1 month old site.
I agree. When I ran a paid forum, $15 every six months worked wonders. It’s not expensive and people are a lot more willing to pay that amount.
How do you determine whether or not to try a subscription based service. For example, my site http://www.recipematcher.com may not work if i implement a monthly/quarterly fee.
Exactly, and this is how you can make some good $ with donations. People pay for value especially if it’s a surprise and they were never expecting it anyway.
Haha I know exactly what you mean.
Web hosting companies promise the WORLD and then you get e-mail support that takes 60hrs for a reply or their uptime is terrible, etc.
I’d imagine if WH companies did do this they would get no signups… that’s why if anyone I know wants hosting I ask them is their business really only worth $5 or $10 a month? Suck it up and get a real host.
Those ads are pulled from Ebay. Many ebay sellers add Hot women to grab you attention (usually these sellers are selling soemthing worthless) but people buy because it got their attention.
Absolutely agree with what you write. Recurring commissions end up being far more lucrative in the long term and I have been encouraging affiliates to seek them out for years.
Worth reading article on linear income v. recurring income. One of the programs we manage, Easyflirt dating pays 55% commission on all subscriptions for life.
We talked about this in a couple comments up…
ToddW, good point. You’ve gotta start somewhere. I’ve still got plenty of time before I get to the “something to offer”!
Just to add to this, I’ve created a few subscription based sites – not totally based forums, but that kind of setup with some niche tools – and I’ve found that around $5/month sits fine with most people. I normally allow billing cycles of 1, 3 or 6 months with slight discounts for the longer term commitments.
At what point does a forum (or a website) become something to charge for? Is there a certain benchmark figure you look for?
if are serious about provising value there is a saying that goes like this: “underpromise and overdeliver”
Shoe, great advice again. I have read something about this before and thought about it in a ‘what if’ sort of way, but never saw a case study/actual numbers.
Yeah I agree on both. Of course he did say that the changes were coming soon, so this was probably ShoeMoney. I’m sure once the blog changes over it will have the author listed.
great post…reccurring payments are great by you need to have good number of people posting on the forums..
Must be something worth for community that can attract them to subscribe.Or else it would look like nothing.
What’s up with the porn in your ads? Am I going to have to avoid your site while I’m at work now? Is this the only way AuctionAds can get CTs? Lame.
Very true. Even though it clearly says they are “subscribing”, many people don’t seem to get the concept that they will be billed again in the future.
It works with any “informational” type product but unless it’s updated or you are constantly getting new subscribers you are pretty limited. This is why forums with constant content from users and subscripton/donation payments work so well, always fresh!
I agree, value = more signups.
I also agree that automated “specials” are the way to go… they take no effor on the owners part other than initial setup. Not to mention VBulletin subscriptions are SIMPLE to manage
I think you just invented a ‘Shoemoney Niche’niche.
Shoe has had failures as well as successes and lets some of them known here. The important thing is to keep on keeping on.
Very good post Jeremy. I actually needed to find something like this as with our tremendous portfolio of membership sites launching, pricing them hasn’t been much of a fun task. So much of it can also depend on the design, how you design it, how you reach out to the end user, just the same with the content they are subscribing too. Very good stuff here. Great find.
Figure out how to get some proprietary information specific to a niche and release it only to paid subscribers first. Be creative.
TWIT seems to do really well with donations. It wasn’t long before they were making $1,000’s a month – but hey that’s TWIT.
This reminds me of how some of the Web Hosting companies out there should operate… instead they promise the world and don’t deliver AT ALL.
Well if you only have 100 members I wouldn’t expect to get rich but a % will still donate/becoming paying members.
I think I would wait until the forum has something to “offer” the user… even if it’s just a large # of posts with great information.
I believe users will be more likely to donate if they see the value in the site
I have two questions:
1) Did shoemoney write that post? With the new way the site is going to go perhaps it would be good to identify who writes each post. All the formatting and stuff made me think it wasn’t jeremy. However, he used the trademark “there” instead of “their” so maybe it was jeremy. Anyway, if you labeled who wrote each post it would help me. Then again maybe I’m missing something and they are already labeled somehow.
2)Does ShoeMoney translate to “ShoeMonkey” en espagnol? :p I keep seeing this trackback in the comments in spanish that talks about “ShoeMonkey” but I can’t make heads or tails of it.
I was thinking the same thing. Without many members, or content, it’d be tough to ask for a lot of money. Maybe you could offer the first 10 subscriptions to be free, or however many it takes to build up a fanbase.
Hi Jim,
The site focuses on Sudoku, and the membership is $15 for 6 months.
As for Shoe saying ‘Don’t promise anything’, what I read was
For terms of service I basically offer nothing I know I might not deliver
ie – don’t disappoint your members by offering competitions & then not awarding prizes etc. My member’s benefits are all automated & don’t require any special work from me.
While some sites offer donation-based subscriptions (you get a warm fuzzy feeling, but that is all), I think it is an easier pitch if you are offering somthing of value.
I’m wondering the same thing. With the new project I’ve started, there are 3 other sites, but only 1 forum, that have the same niche. That forum is free. Just wondering if charging a subscription (if marketed well) would offer some sort of “quality” aspect to my forum.
Here is an idea I just came up with: On the forum sidebar put a list of the last ten questions asked by premier members. That way their questions get immediate attention by everyone on the forum and it doesn’t require the forum owner to do any additional work on a daily basis.
You can sell advertising space in an email newsletter – there are plenty of ways to leverage it into something more. For instance teaming up with other email newsletter runners so that their new signups get asked if they want to join your email newsletter and vice versa…
Cool post.
Thanks for reminding me that perhaps I should charge more
I haven’t yet tried setting up a forum as an income source – is that a profitable model? Doesn’t it take a lot of time moderating and adding new posts – or take a lot of money paying people to do that for you?
I have a question, How many members does it really take before you can start the subscriptions, I assume if the forum is too small it would look bad, But then again, I guess if you start it from the beginning it could be beneficial as well…..
Maybe I will just give it a go and see what happens, It can’t hurt….
Gath – If you don’t mind my asking, what’s the topic of the forum and how much is a membership? I think positioning it as “support” is a good idea (albeit not in line with Shoe’s advice of not promising anything) and I bet people would more likely to pay if they knew you’d keep ads off. I dunno about SMilies in posts though .. haha
It’s kind of like earning interest in a savings account.
Well, if your community can see benefits in subscribing, that’s how long it should take.
Wow Jeremy, you really went into detail on this post, I love it. It gave me some inspiration on subscription based revenue, thanks.
some examples would be great…by the way whats the url of some of the sites you have this implemented on????
Thanks for the tips, Shoe. Is there any advantage to offering multiple “tiers” with different price points?
Great advice Shoe. What other solutions generate this kind of passive income besides forums?
What are the best niches to start subscription websites? Sounds like good residual income!
Hi Shoe,
I implemented subscriptions when you first posted about them (about a year ago) and currently have about 200 members signed up.
I position the subscription as a ’supporting membership’ and make it clear that the membership goes towards keeping the site running.
I also give the users plenty of extras:
* No Ads
* Smilies in their posts
* A personal page where they can load photos/videos etc
* A downloadable game
Plus some other stuff.
Implementing Paypal was really easy, and overall I think subscriptions are well worth it.
Shoes said before that he doesn’t like to post the sites that he runs all over the place, so I wouldn’t expect to see any example URLs from him. But for $19.95 every 6 months I’ll keep you updated on the sites he operates that I know of
Interesting. I’ve always found community management to be tough (probably because I don’t dedicate the time to building a forum) but that’s a nice option to have.
Shoemoney amazes me with his ability to find open niches. I have a hard time getting people to post in some of my free forums, much less to think about charging them. Gotta hand it to you!
I’ve monetized a few forums with paid ads, CPC etc, but I never tried just asking for donations, guess it always seemed like something that would never pay off, but think it may be time to have a trial run.
We’re looking to start selling a product on our site and this post couldn’t come at a more oportune time! Thanks a lot for the info. And by the looks of things, people seem to agree with this price point. I wonder if it varies on the products you sell?
I’ve been toying around with the idea of creating a subscription service that gives power users access to my forum “ad-free”. Many of these power users don’t click the ads anymore… since they have become blind to them, so my thought was to try and monetize that trend… and try to throw in some extra functionality … some cool reports… tools for more easily managing their posts… etc… Kind of an enhanced version for those interested in paying/donating to the site.
I try to justify the cost by both the idea that we (the site) no longer make money from ads off them… AND two they advanced features we supply them are more processor intensive apps that we can’t make widely available for free else our server costs would go up… etc.
Thanks for re-enforcing the idea… motivated me to give it a second thought!
I understand subscriptions but how do you make such a site that people want to get in for a few ?
I find it hard to write all the content alone (I am technical guy, not a writer). As I understand from the comments most people use this kind of revenue gathering in forums. But how to setup a successful forum ? Hire people to post content ?
The same is true for webhosting… what kind of support do you get for $5 or $10 a month? Almost none!
You get what you pay for has been drilled into peoples’ heads for years and it can really be to your advantage to raise the price
Great advice. I’d also be interested in seeing a forum that you run that also has subscriptions.
You don’t have to offer them anything… it’s a donation to keep your site “aliv” and free, as in not a monthly payment requred to access the tech you post.
Or offer small forum “add-ons”, photo gallery to show-off ???, avatars, signatures, user titles, access to a prviate area on the forum, etc.
There’s lots you can do w/out giving the user something personal.
I think Shoe is talking about straight-up donations however… either work great if setup properly.
If you frame it as a donation, you don’t really give an incentive to paying a subscription, you just appeal to a person’s guilt/generosity side. Some people have done donation buttons with success but some other haven’t (i remember when Stephen King was giving away chapters of a book for free and asking for $1 donations, he gave that up pretty quickly though).
Just as your post states price points are Key and as with PPC campaigns you need to test and tweak them to find what works for you. You have to make people feel like they are getting a deal to buy in but not so low they think it is a scam or to good to be true. As who really thinks for 9.99 you are going to tell them how to make 5K a month but for 69.99 hmmm makes it a little more believable.
I don’t get it. Your sales line is “Sign up for our forum and get nothing in return.” This works??? My friend Cesar (the guy who wore your shirt at PubCon in Vegas), has been trying to get me to do a paid section on my forum for a while. But its a technical site and I don’t want people to think I’ll become their personal tech support for less than $5/month.
So what’s the catch to get people to sign up? Can you give some more suggestions or point to some examples of sites that are successful at getting members to sign up for nothing in return? I’m just not getting this concept…
Well one of the big reasons they joined was to be able to entry in “give aways”. We were giving away sets of tires, rims, web hosting, etc.
But! Like Shoe mentioned if we ever skipped a give away deadline or didn’t provide an OPTIONAL (user thought guaratneed) giveaway or feature they complained.
Now I just offer the ability of custom avatatrs, seeing what’s going on “In the Shop”, special product pricing on new or surplus items.
Basically, give the users something guaranteed like forum features not a product or guaranteed giveaways, etc.
(SORRY FOR DOUBLE POST!)
Forums subscription are a great way to make money. For my own forum the sweet spot is $15 / 6 months. It seems to take 6-9 months before subscriptions take off (from my experience).
The biggest problem I have is to know whether or not to convert my subscription based newsletter into a ebook. And if I do, what pricepoint to put it at. I just want passive income for the rest of my life. That would be really sweet!
there is nothing better than passive, residual income
This is a neat idea. Do you simply sell it to the user as something to keep the forum running, to access a special area, or to use the forum itself?
I don’t think he means that you start a forum and immediately start charging (unless you’re Quadszilla), but maybe after you have a large site you start an exclusive section? I don’t have much experience with forums so I’m just guessing out my azz.
“For terms of service I basically offer nothing I know I might not deliver. I refer to these as donation based subscription services. This means you are not guaranteeing crap.”
Great advice right here. I started doing subscriptions on a forum a couple years ago and was offering the users a couple “things”… well if I didn’t deliver or was late with the item they would bitch and moan.
I like the idea of “donations” as a reason
I’m fairly active in the game publishing business and this data is very true.
Game publishers know that if a game is priced at $9.99 it will sell many more copies than if it were priced at $11.99.
You also need to look at what other folks are setting as price points. If your game is full of bits you can ask a higher price. If it is not than do not expect to sell as many with a high price.
A warning about using Paypal would be that should you ever sell the site you will need to try and get all the users to sign back up for the service and the new Paypal account. I had a site with over 10000 members and found it a major pain to sell
But as they say 2007 is the year f the subscription site!
>Most of my subscription revenue is from forums
Care to link to one as an example?
Thanks for another amazing post!
If someone out there is offering a similar service for free do you think its still worth it to try to do a subscription based service?
I definitely see the benefits of recurring sub. based income.. but my only concern is this. How long does it take to build a forum that has the community base and staying power so that you can command a subscription price? There are only a few forums I would consider paying for, and they’ve been around for years ( 5+ in most cases ).
Not saying it’s a bad thing, but rather, it seems like it would take a huge amount of time and effort to build.
Pricing has always been tricky in any business and, much like contextual advertising, it comes down to testing a lot and learning what your market will like in terms of price vs. luxury effect, things like that. Like you said, you never know and you have nothing to lose… I bet five years ago (or even two years ago) no one would’ve believed that you could just start a blog and be able to generate a nice revenue stream but now everyone wants to get in on it.
It’s been years since I sold an ebook or anything like that, but I can concur with your findings.
I think the biggest issue with recurring payments is to clearly mark the payment as such. Because a lot of people don’t read, and they signup to be billed every month, then they are VERY unhappy next month when their paypal account gets deducted automatically.
Then you have an unhappy customer.
“For terms of service I basically offer nothing. I refer to these as donation based subscription services. This means you are not guaranteeing crap.”
I think this is GREAT advice.
I started a subscription user group on one of my forums a few years ago and had a list of ~5 “things” they got, well if you don’t deliver they bitch and moan… I like the whole guarantee nothing, offer nothing, and call it a donation
Wicked idea.