How do subscriptions fare in a recession?

By | March 9, 2020
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Source: App Annie, State of Mobile 2020

The subscription model (‘subscription economy’ was a term apparently coined at least four years ago) is becoming de rigeur in many zones. App Annie’s recent State of Mobile report found that In App subscriptions contributed to 96% of spend in the top non-gaming apps. As an overall proportion of spend they rose from 18% in 2016 to 28% in 2019 (games, of course, still dominate.) It concluded in a recent post: “Clearly companies across industries need to not only be thinking about their mobile strategy, but also their subscription strategy, if they want to succeed in 2020.”

But is this a wise move?

The attention economy, as folk call it, depends on competing for a limited resource — our attention. But it will always be trumped by a resource that determines what can be done with that attention — money. If we have no job, then our attention tends to be focused elsewhere. If we have a job but not much money, or are afraid of losing that job, then our attention to other non-job issues is probably limited.

The other thing the attention economy relies on increasingly is the subscription model. Recurring fees are much more appealing to a company than a one-time cost, which is why everyone is heading that way. But the subscription model has an achilles heel: most services that used the subscription model in the old days were because of the way they were produced and delivered — electricity, water, telephone, gas, newspapers, cable. And most involved some lock-in: an annual or quarterly contract etc, which hid the overhead costs of connecting, delivering and disconnecting in the subscription. But to disrupt these entrenched subscription services OTT upstarts which didn’t have those costs like Netflix made it real easy to subscribe — and unsubscribe.

And here’s the rub. When subscription becomes a discretionary spend — something you can shed like a skin when the rain comes, then you find the weakness of the subscription model. This is why old guard subscription model players like the New York Times have transferred their approach to digital, knowing it’s better to alienate a few users by making unsubscribing disproportionately harder than subscribing, absorbing the hit of a few angry folk like me in order to keep the bulk of subscribers who couldn’t be bothered to jump through the hoops.

So when the Coronavirus Recession hits you, what are you going to shed? Discretionary spend is the first one to go, and that usual means monthly outgoings that just don’t seem to be as important as they were when you were coasting. Indeed, a lot subscription economy players, like Statista and others, only offer an annual subscription, although they price it per month to make it sound less. It’s cheaper, and more predictable, to charge per year.

I’m not convinced that software is a good candidate for subscription models. I understand its appeal, and I am as frustrated as them how the mobile appstore has reduced the amount that people are willing to pay for good software.

When Fantastical, a calendar on steroids for macOS and iOS from Flexibits, went from a one-time fee to a subscription model it split the community — especially those on iOS who suddenly had to pay 10 times what they were paying before. John Gruber argued $40 a year for a professional task app on all Mac platforms was a decent deal, arguing that those who don’t want to upgrade can still use the old version, and he’s probably right. But I haven’t upgraded and have instead shifted over to another calendar app, BusyCal, that is included in Setapp, another subscription model which bundles together multiple apps for $10 a month. In part that was because of the annoyance of finding certain features still available as menu items in Fantastical but blocked by popups:

Not the kind of productive experience I am looking for. Hobbling or crippling, as it’s sometimes called, is never a pretty look. You either have the functionality or you hide it.

A better route is to be flexible. Of course, there’s an upside to monthly subscriptions that are real easy to start and stop — when the sun shines, you can easily resubscribe. Indeed, the smartest subscription model in my book is the freemium one — where you can easily move between subscription levels depending on usage and how empty your pockets are. I recently canceled my paid Calendly subscription, downgrading to the free model and was told by a helpful customer service person that “you can certainly choose the monthly plan on your billing page and pay for only the months you need it for! That might work better for you.”

I would recommend any company moving to the subscription model to do this. Or to pursue the bundling model. Not to lock people in — where one subscription depends on another — but to make what might have been discretionary spend something that becomes necessary spend through a compelling use case. Setapp is that model (though sometimes I baulk and wonder if I’m paying over the odds). A lot of the apps I use on Setapp are ones that I would have not otherwise found — and I’m an inveterate hunter of new apps. By making the marginal cost of using them zero, I find they worm their way into my workflow. Setapp helps this by taking  an interesting route, in that its appstore-like mothership is so baked into macOS that searching for an app installed on my computer via Spotlight or Alfred will include in the results apps that haven’t been installed but are part of Setapp. So if I’m looking for a photo editor, or screenshot taker, or calendar app, on my Mac the results will include those in Setapp that I haven’t installed.

This shoehorns productivity into the subscription model. It’s helping to make Setapp more useful by introducing me to new apps it is has in its portfolio — thus making all the apps in Setapp more recession-proof because the more Setapp apps I use, the less likely I’m going to cancel the subscription overall. (Yes, those apps I don’t install or use won’t get a cut, or will get a smaller cut, but the overall rising tide will help keep all the boats afloat. Or in a tweak of the analogy: all the apps in the Setapp boat, amid the buffeting recessional sea, rely on the size of the boat to keep them all afloat. Only if the boat sinks will they sink).

Bundling makes a lot of sense in disparate fields — I’ve been advising media clients to seek out bundling options with other subscription model companies which previously might have been regarded as competitors. Bundling should not be the cable TV model of putting the good stuff and crap together and forcing subscribers to pay for both, but to try to anticipate — if your customer data is good enough you shouldn’t have to guess — what else of value is in your customer’s discretionary bucket, and try to move both yours and those into a necessary one. A tech news site coupling with a tech research service, say. 

In the meantime, expect a lot of subscription-based approaches to suffer in the recession. I expect by the end of it the subscription model won’t be so appealing, or will require more creative thought processes to evolve. The key is in not treating the consumer as either stupid (that we don’t realise $5 a month adds up over a year) or lazy (that we won’t do what is necessary to cancel a subscription if we have to), but to take the freemium model seriously: make it really easy to reduce our payment when we need to, and really easy to go back when we’re feeling flush again. Just don’t cripple the quality of the service you have committed to deliver, even if it’s free, by ads beseeching us to pony up or by drawing arbitrary and punitive lines which make the free version more irritating than alluring.

Then just wait out the storm, as are we all, and hopefully you’ll remain useful enough in the free version to stay on our radar when the sun returns. 

Swiss to Cheese: Apple Transforms Another Industry

By | February 14, 2020
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Another Apple product I’m unlikely to purchase — a smartwatch. I don’t need more screens to look at frankly, but I doff my smartcap to the company for the way they’ve usurped an industry that already existed and then doubled it. This approach has some parallels to the AirPod strategy, which I looked at before : take a market that exists, wait until the technology works, have a couple of shots at it, dominate it and then expand it. Here are the latest numbers, courtesy of Strategy Analytics:

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In short, Apple has not only grown its shipments by more than a ⅓, it’s eaten a sizeable portion of the Swiss watch industry’s cheese lunch. As SA’s Steven Waltzer puts it: “Traditional Swiss watch makers, like Swatch and Tissot, are losing the smartwatch wars. Apple Watch is delivering a better product through deeper retail channels and appealing to younger consumers who increasingly want digital wristwear. The window for Swiss watch brands to make an impact in smartwatches is closing. Time may be running out for Swatch, Tissot, TAG Heuer, and others.” The full report can be purchased here.

So let’s put this in a slightly broader perspective. This is a tipping point in the evolution of the watch and a hammer blow to the Swiss watch industry. While the figures don’t quite tally with Strategy Analytics’, those from the Federation of the Swiss Watch Industry show just how effective Apple has not only created a market for itself, but also usurped another’s. For years the Swiss watch industry had been relatively settled, only to see Apple — and knee-jerk competitors like Huawei and Samsung, who have also carved a market for themselves on Apple’s coat-tails — gradually erode their business. Last year shows just how far it has gone:

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This is classic Apple in many ways. There were lots of ‘this is make or break for Apple’ type stories in the first year, and overblown predictions of 2015, and 2016, had to be revised. Indeed, while overall shipments of  smartwatches rose in 2016 (from 20.8 million to 21.1 million, according to Strategy Analytics, Apple’s shipments actually shrunk, while others rose. But these were teething problems: sensors needed to be more accurate, sales channels with telcos needed to be tweaked. By 2017 Apple had fixed most of this, and the trajectory is clear. Probably more importantly, consumers realised that if you were going to put a smartwatch on your wrist, it had to be a classy one. There was no ‘good enough’ syndrome for that bit of prime real estate. And, like the Air Pods, the device needs to have a seamless relationship with the parent device.

Lessons learned? I once again wasn’t convinced about the smart watch. I haven’t bought one, and don’t intend to. But I get it; Apple is currently making much from the stories of how these devices may have saved lives. This isn’t the reason people buy these things, but it’s a good argument to win over the spouse, or conscience, and it does point to how, eventually, medtech and consumer device will merge beyond the hobbyist and fitness fanatic. And it’s not hard to see how soon enough the ear piece and the wrist will eventually become The Device, and we can ditch the smartphone altogether.

Apple, Again, Creates a Market Out of Nothing. And It’s Massive

By | January 9, 2020
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Having recently (finally) bought a pair of big chunky Bluetooth headphones, thinking they were so commonplace I wouldn’t get any weird looks, I now realise that once again I’m at the wrong end of a trend curve. People are staring at me — and not for my rugged visage. I’m the oddity: everyone else is sporting wireless earphones, the Apple AirPods variety (although I suspect quite a few of them are the cheap knockoffs which are indistinguishable in look and a tenth the price.)

Man wearing white AirPods.

Reality bites: what once looked a bit weird — massive headphones — looks weird again, and what looked even weirder — wireless earphones with little sticks dangling out of them — looks cool, and increasingly normal.

Man wearing a Bluetooth headphone

Man wearing a Bluetooth headset.

The data is surprising.  Canalys reports that what it calls “smart personal audio devices”– lumping together all the various wireless or semi-wireless buds, earphones and headphones — are this year set for strongest year in history, with real wireless earphones (true wireless stereo, or TWS) “the largest and fastest growing category.”

Indeed, it’s not only the fastest and largest growing category. It has leapfrogged the other two in the space of a year.

Hearable pr20191226 final slide2final

That’s particularly interesting because the original AirPods were launched three years ago. It’s taken that long for them to conquer the market, and this is a product that cost anywhere between $140 and $250. Yes, I know people spent silly money on headphones but that’s a lot of dough for something so small you’re likely to lose it down the back of the couch or running to catch the bus. But it has become, in quite short order, a massive market when you consider how many smartphones there are. In terms of units, it’s a quarter the size of the smartphone market (see below) which, according to IDC was about 360 million units in Q3 2019. And that market is virtually static, while the ‘smart personal audio devices’ market has nearly tripled.

Hearable pr20191226 final slide3

This is all of Apple’s doing. They created the wireless earphone market singlehandedly. They were slow on headphones, and they never went for the wireless earpieces connected by cord, and their ordinary earphones have never really, in my view, stacked up, but it seems with the second version of the AirPod, and the AirPod Pro, they’ve taken the market they created and dominated it:

Hearable pr20191226 final slide1final

You could argue that since they only work with Apple devices the data is skewed but you could also look at it the other way: the Samsungs, Huaweis and Xiaomis of this world have not risen to the challenge for the Android market, and are lagging woefully. Given that Samsung shipped 78 million devices in Q3, while Huawei shipped 67 million against Apple’s 47 million (IDC numbers again), it’s clear just how much of a market opportunity they’ve missed. Canalys’ numbers, meanwhile, suggest that Apple shipped 18.5 million AirPods that quarter, meaning that 40% of every iPhone sold was sold alongside, or nearby, an AirPod. That’s impressive stuff.

While Canalys focus on the ‘smartness’ of these devices — the control they allow, the possibility of sensors etc capturing health data and serving as payment devices — I think that’s not the point. The likes of Jabra have been trying to sell wireless earphones for swimmers, runners etc for years, and it’s remained a niche market. Apple have instead done what they do best — mastering the technology to make the experience of listening to stuff easy, seamless and, at least now, so cool it’s become de rigeur. The problem was always a simple one: wires. They got rid of the wires, and they made devices that sound good, fit snugly and well (at least with the Pros) and connect relatively painlessly.

That was the problem to solve, and hence the market unleashed.

Don’t overcomplicate it.

The Future of Work Rethought

By | January 6, 2020
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I recently did two things I hadn’t done before. One was to cancel my membership at a co-working space. The other was to meet, face to face, my virtual assistant of seven years. I belatedly realised the two events were connected: the freelance world, once a parallel universe hidden from view, is fast switching places with the real one, and governments, companies and families should take note.

It’s tempting nowadays to think that technology is redefining work, and not in a good way. AI and robotics are stealing away work from top to bottom, from lawyers to assembly lines. Gig platforms like Uber and Deliveroo are slicing up jobs into ever smaller chunks, making robots of us before the jobs are actually handed over to robots. And technology outsources what can be outsourced.

But I realise this is just one side of things. Who are all these people to whom this work is outsourced? By 2020, the number of self-employed in the U.S. will triple, to 42 million people. Freelancers are the fastest growing labour group in the European Union. Behind these statistics is a story, not just of harried drivers and deliver guys, but of knowledge workers who have chosen their own lifestyle, who have defied the disintermediation of the so-called platform economy. They offer a counter-narrative to the usual technology story of innovative disruption.

Take co-working spaces. On the one hand such spaces have proliferated. I recall looking for a co-working in Singapore space back in 2009 and finding only one, on the campus of one of the universities, and when I turned up one morning there to find the curtains closed, bodies all over the floor and a distinct odour of unwashed students. Now, every other floor in the tower blocks of the business district are co-working spaces, though the business looks nothing like it was originally imagined to be. Just don’t expect to find many freelancers there.

Co-working sounded like a freelancer’s dream — a place for those working alone and from home to find space to work, to mix, to find work, to find comradeship. It may have started out like that, but you won’t find many freelancers in a co-working space nowadays. Respondents to a survey of 99designs freelancers, for example, showed only 4 percent of them used a co-working space.

I asked Patrick Llewelyn, CEO of 99designs, why this was. One reason, he said, was that most of the designers on his platform are primary care givers, looking after either their kids or a family member, and so tend to keep less formal hours. As co-working spaces have become substitute offices, they keep office hours which don’t suit most freelancers, most of whom want to get away from the 9-5 grind.

I also realised there was little that was appealing. I abandoned mine when I realised I didn’t enjoy going there. I had returned to working for myself a year or so ago and long admired co-working spaces as a vibrant, tasteful, colourful alternative to the dour, dusty and downbeat newsroom I worked in. But I realised that co-working spaces were too self-conscious, too brimming with hipness to be genuinely convivial. And expensive.

So freelancers choose their own path, and it doesn’t fall easily into any fancy new disruptive model.

And then there’s the other thing: my virtual assistant. She’s real, but based in a Philippines town far from the madding crowd. I had always imagined that one day I’d make the pilgrimage there to meet her, since when she started working for me, she didn’t have a passport. But by now she, husband and two kids in tow, was the peripatetic one, carving time for me in her hectic tour of Singapore.

This is the other thing that struck me about what Patrick told me. When I asked about how his freelancers find social fulfilment if they’re working from home, he said that’s the point. By staying home, often looking after family, they’re able to retain those physical connections that those working in an office tend to lose. And being able to support themselves gives them a sense of contribution as well as a creative outlet, which in turns give them confidence.

When Patrick recently went to Novi Sad, the second largest city in Serbia and one of 99designs’ biggest markets, he attended a meet-up of freelancers who clearly knew each other and felt a kinship and warmth you’d be hard pressed to find in a co-working space. Amarit Charoenphan, cofounder of Thailand’s first and largest co-working space Hubba, told me that in the rush to grab market share and protect themselves from competition, many co-working players had lost the human touch, of fostering a community among their members. He sees the future in algorithms, co-working 3.0, where spaces draw on technology to address the emotional benefits of being together.

Freelancers might argue they already have that, using apps to connect to friends and colleagues, while staying or moving to the places they love. My virtual assistant continues to work from her seaside home, bouncing her two-year-old daughter on her knee on conference calls with her main client, a friend of mine based in Texas. She worries about brownouts and the occasional typhoon, but with internet connectivity improving, she’s rarely offline for long.

She’s part of a massive, gradual shift in knowledge work, from the big city to the smaller towns and villages. This shows up in the data: Less than a quarter of the 99designs freelancers live in urban hubs of more than a million people — just as many live in towns or villages of less than 20,000. This is true more or less across the board: In the U.S. and Indonesia the number falls to be low 14% who live in a metropolis. Data from Upwork, a general freelancing site, shows that for a lot of specialised work even those based in remote towns in the developing world can command decent USD rates.

For sure, freelancing isn’t for everyone, and it’s not always easy to get your first client. And platforms that break down basic tasks like delivery and driving will always be a race to the bottom. But for those with skills, or those motivated to acquire them, the freelance economy has grown in the past decade to be a vast continent in the landscape of the future of work, mostly unnoticed by governments and immune to Silicon Valley’s eviscerations. Which reminds me; I have to go, my virtual assistant is reminding me we’re due a virtual brainstorming session.

A Battery-less Future?

By | January 29, 2020
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(Corrected: Atmosic has not (yet) won the GSA Award, but is short listed for it. The winner will be announced in December. Apologies)

At what point can we ditch batteries, the last encumbrance to our wireless nirvana?

The biggest single block on a wireless, connected future where everything everywhere is attached to chips and sensors which relay, receive and act on instructions from afar is power. And that means either that the device is connected to the electricity grid (which probably means you don’t need it to be wirelessly connected) or it has a battery in it. Which will need charging or replacing.

Long-range low-power technologies like low-powered wide-area networks (LPWANs think LoRa, NB-IOT and SigFox) have gone some way to solving this problem — instead of a power-hungry 4G modem you have a simple chip that sends only the most necessary data and runs off a battery that can run for years — but that doesn’t solve the problem of more complex or power-hungry devices that need to communicate more frequently and more loquaciously. These endpoints will need someone to service them. Internet of Things, Interrupted.

But what if the devices could find their own energy? What if they could “scavenge the energy they need to operate from whatever naturally occurring electrons were in their environment, regardless of that environment”, in the words of Chris Rust, founder and general partner of VC investor Clear Ventures?

Energy harvesting, as it’s called, is not new. Solar power is in effect harvesting the sun’s rays and turning it into energy via photovoltaic cells; wind or wave turbines do something similar (called electrodynamics). But scavenging ambient energy in the immediate environment into electrical power will yield only a few watts at most — enough to augment batteries or, possibly, to replace them. (Still enough to power your solar calculator indoors, and solar power is highly efficient at conversion.)

Energy harvesting can be done an in a number of ways:

  • kinetic energy — vibrations, stress, tension or movement using piezoelectric materials, for example. Imagine the vibration on aircraft wings being converted to energy, or the reverberation of heartbeats to power a pacemaker. (Some examples of vibration energy harvesting can be found here from ReVibe Energy of Gothenburg.)
  • Other examples of vibration-based energy harvesters are triboelectric charging — when certain materials are separated one becomes electrically charged (think the static electricity from running a comb through one’s hair) or the more traditional electromagnetic vibration, where relative motion between magnet and coil induces current into the coil. (Think turning a door knob or hitting a switch.)
  • Then there’s temperature — where differences across a thermoelectric crystal cause a voltage, or the temperature of a pyroelectric crystal changes, generating a charge. The new PowerWatch, for example, uses both thermoelectric — the heat emitted from your wrist — and solar charging. The device uses chips from Matrix Industries.)
  • Then there’s radio frequency (RF) radiation, emitted from routers and cell towers, or from RF chargers, that transmit electromagnatic waves in a specific area. So while this might be scavenging in the sense that it is capturing wasted or existing radiation, it could be deliberate — say, via pointing an RF source at your remote device and switching it on.

So some of this is happening. A RFID (radio-frequency identification) or NFC (near field communication) sticker (think price tags) or chip (think contactless cards, or has no battery in it, instead harvesting the power from the device connecting to it through a technique called backscatter, which transmits data by reflecting modulated wireless signals off a tag and back to the reader.

In the labs of academia the vision is that the body becomes a patchwork of, well, patches, where the energy is derived from the body itself to power unobtrusive sensors which monitor our health: solar-powered heart sensors no bigger or less flexible than a Band-Aid, or sensors that draw their power from the natural conductive properties of skin, storing their energy in stretchable capacitors made of carbon nanotube forests (so called because the material grows like trees 30 micrometers tall, their canopies tangled on wafers.)

But for now, the movement is in industry, and buildings. Companies like EnOcean sells self-powered switches and sensors for maintenance-free lighting which draw their power either, in the case of switches, from the kinetic movement of being pressed or in the case of sensors, from light (indoor and outdoor) or temperature differences to detect occupancy, say.

The changes will really kick in when devices can generate enough energy to be able to transmit over significant distances wirelessly. That means WiFi, which requires a decent-sized battery, rather than, say, Bluetooth, which has too short a range to be any use beyond your headset, mouse or keyboard. That, however, may not be true for much longer. The latest version of Bluetooth, version 5, expands its range by four times, making it comparable to WiFi. And companies like Atmosic Technologies believe they can extend a Bluetooth device’s battery life by between 5 times, to, well, forever.

Atmosic Technologies, just announced as winner of shortlisted for the Global Semiconductor Association’s startup of the year, says that “with the advent of Bluetooth 5, combined with ultra-low-power functionality, power consumption is low enough to be supported by harvested RF, light, or heat energy, while still able to provide the range and coverage equivalent to Wi-Fi.” In short, it makes “the concepts of “forever-battery” and “battery-free” IoT realistic. IoT devices can work for the lifetime of the devices on the batteries they come with, or without batteries at all.”

Atmosic says its a fully integrated single chip with RF energy harvesting (for size see the image at the top of this post) can provide small form factor battery-free operation up to a distance of several meters from the RF source. This could be a game changer, because it would mean not only that all your Bluetooth devices would not require charging, but that they could communicate over longer distances. It would also mean a lot more devices could communicate with each other without you having to worry about whether they need charging. But Atmosic acknowledges that “this is the first step in the journey,” which sounds as if we’re still some ways off the battery-free IoT revolution.