Subscriptions are beautiful because relationships develop over time. If you and your customers agree on the value you are providing, the customer will keep paying and stick around for a long time.
Nonetheless, subscription is still a young market, with Salesforce having been around for a few decades and Bessemer investing in the cloud for the first time just a few years ago. The recurring revenue model is still a baby in the millennia that retail and other industries have existed.
Businesses can gain more revenue, growth, and more satisfied customers through the recurring relationship economy. As a result, the subscription economy is experiencing the most explosive growth spurt ever seen in traditional software companies as well as hardware companies, B2B or B2C.
To better understand and learn from these transformational stories, let us examine how Adobe, GoPro, Microsoft, Nvidia, and Fitbit have incorporated subscription-based offerings into their core businesses.
Early in 2010, Adobe was facing stagnant growth and the ongoing need to upgrade its suites to entice older customers to spend $1200-$2500 on the latest software. Adobe made a radical decision in 2013, they decided to focus completely on a new subscription revenue model, which resulted in Creative Cloud. Customers would have access to the Adobe suite for a low monthly fee.
Creative Cloud has quadrupled Adobe's revenue since it launched in 2013, from $4 billion in 2013 to more than $16 billion in 2020. It doesn't look like Adobe's impressive growth trend is stopping anytime soon, since its subscriber count increased by 17.3% in 2021. Adobe's willingness to wager on the growth of the subscription market ultimately led to them securing a place among the hottest software-as-a-service companies.
Google's success with G-suite (then Google Apps for Business) and enterprise clients meant that Microsoft had to react quickly. Office 365 was released in 2011, offering users access to the entire Office suite for $9.99/month instead of $399 per year as a perpetual license.
Despite being launched nearly 5 years after G-suite, Office 365 has gained traction quickly and the results can be seen on the balance sheet. Four short years after its launch, Office 365's consumer subscribers grew to 18.2 million in 2015. Microsoft has around 51.9 million active subscribers using Office 365 with a 22% yearly growth rate.
Known for their rugged cameras and gear, Go-Pro would be an unlikely company to offer subscription services. However, when their marketing hype wore off, and profit began to tank, they were forced to take drastic measures.
The Go-Pro Plus subscription service launched in 2018 as a way for customers to get the most out of their Go-Pro footage. Since then, Go-Pro has grown its subscriber base to more than 1.6 million, and their gross margin has increased by 11%. In the end, subscriptions can be used to make a beautiful ensemble of lifetime subscription revenue.
The Whoop company entered the wearables market in 2011 by following a traditional business-to-consumer model. Sell your product to the consumer, and hope they purchase the next version when it's available. While this model worked for others, it found itself struggling to get market share against more established brands like Fitbit and Apple.
Seeing the changing market landscape, in 2018 Whoop decided to waive the initial purchase price in exchange for a free strap with the purchase of a 6-month subscription to their health service. Whoops, pivot has since paid dividends, the company has grown to over 18 million subscribers, and is now worth an estimated 1.3 billion.
Nvidia has long been a titan in the world of computer hardware known for its GPUs. Manufacturers and gamers alike rely on their products. NVIDIA launched GEFORCE now as GPUs became more expensive and as more people worked through cloud-based apps.
A cloud gaming monthly service which would allow customers to stream games on any hardware from anywhere with an internet connection. Since is launched, Geforce now has grown explosively to 15 million paid subscribers, with 2 million of those coming in the last quarter of 2021.