The Not-So-New Promise Of The Subscription Economy
Jason Pressman, Valley Voices
via Forbes - May 17, 2017
The idea underlying the subscription economy is hardly a new one—the subscription business model first emerged during the 17th century as a way for authors to sell atlases, geographies, histories, and works of literature on an ongoing basis. While the idea itself may be old, the advent of the internet sparked a resurgence over the past two decades, transforming how almost everything—from dinner and CRM software to pet food and Cadillacs —gets sold.
Today, the subscription economy is thriving, powered by real time insights and data on customer activity, and there is no going back. Yet, we are still in the early days of what’s possible.
Lessons from Walmart.com
I’ve had many conversations with people who think the modern subscription economy (as we know it) has only been around for 4-5 years. But the reality is that it’s been around since 2000 when I was at Walmart.com building an e-commerce platform alongside a team that was investing in a broad array of digital businesses. These businesses included an ISP, digital photo services, digital music services, and DVD rental services, all of which were offered to consumers as subscriptions. This marked a significant contrast from Walmart’s historic ethos of selling products. While some of these businesses didn’t pan out, the positive response from customers made it clear to me that the digital world was paving the way for the subscription economy.
At Walmart, we were an early customer of Coremetrics, one of the first leading Application Service Providers (ASPs), which in today’s terms would be called a Software-as-a-Service analytics provider. I remember when I made the call to buy the Coremetrics service, my peers said I was crazy to put our analytics outside of the firewall. I thought they were crazy not to see the opportunity. Our team had so many projects to focus on—why wouldn’t we pay for a company that did analytics as a dedicated service, and therefore did it better than we ever could? Plus there was the added benefit of only paying for what we used, and conversely, not paying for what we didn’t need. And, the consistent upgrades were a tremendous benefit as well. Coremetrics gave us much-needed insights into our customers’ online behavior but just as importantly showed the increasing adoption and engagement of online shopping.
Based on this experience, I came to believe that the next 20 years would set the stage for a massive shift from buying something once to ongoing subscriptions. Much of my career and my investment thesis at Shasta has centered around the belief that the subscription economy is the future of business.
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