How to Build a Successful Consumer Subscription Business

About 15 years ago, tech investors began pouring their money into a new business model: B2B subscriptions. It may not have been flashy, but it bore fruit: across many different problem areas, subscription software sold over the internet produced dominant new tech companies—like Shopify for selling products online and Zendesk for managing customer support. Even incumbents like Adobe and Microsoft rebuilt their businesses around these subscription models to unlock new growth. 

Unlike most trends in tech that start on the consumer side and then migrate into B2B over time—think of mobile apps or great user experience design—the subscription model did the reverse. B2B subscription models started to take off after the IPO of Salesforce in 2004 and the launch of AWS in 2006, and then-startups like Shopify (founded in 2006), Dropbox (2007), Zendesk (2007), Asana (2008), and Slack (2009) grew quickly thereafter. 

In the wake of those companies’ success, founders started adapting consumer software to subscription models, initially on the web and increasingly mobile-first after Apple’s App Store debuted in 2009. The breakout year for consumer subscription models was 2011, when Duolingo, and physical grooming and beauty product companies Dollar Shave Club and ipsy, respectively, were all founded; Spotify launched in the U.S.; Amazon introduced video for its Prime customers; and Netflix’s stock grew propulsively after a decade of mediocrity. 

But while founders and venture capitalists would preach the gospel of predictable revenue and sustainable growth, outside of the big three—Amazon, Netflix, and Spotify—consumer companies have largely under-performed their B2B counterparts over time. This chart, which illustrates the differences between the two models, hints at why:

I was the chief product officer at Eventbrite, a business that launched its first B2B subscription product a couple years ago. I’m also a board member of Beek, a B2C subscription audiobook company, and I’ve advised many companies across both models. So I’ve had to confront their differences many times firsthand. I’ll dig into the reasons for the disparity in their performance, and then explain how to produce superior returns in the consumer subscription category.