What if Subscription Isn't the Right Business Model for the Internet?

Subscription is everywhere. Does it really work?

Subscription pricing is everywhere. Streaming services, productivity apps, online courses—if you've used software in the last decade, you've probably been nudged into a subscription. Investors love it. Executives love it. In theory, subscription is the perfect business model: recurring revenue, predictable cash flow, and alignment between the business providing ongoing value and the customer paying for it.

But what if it's fundamentally misaligned with most consumers—and the internet itself?

Why Subscription is Everywhere

From the business side, subscription solves a lot of problems. Marc Andreessen has called it "the ideal business model." VCs are enamored with its promise of turning lumpy, one-time payments into smooth, compoundable revenue. Recurring revenue is predictable, which helps businesses raise capital. And once someone's signed up, they're often too busy (or forgetful) to cancel.

Nothing unites everyone like hating subscription

But for regular people? Subscription feels like a scam. We've seen the memes: "Every app wants $9.99 a month for something I'll use twice." It's not just about the money—it's the psychological pain of potentially wasting money over and over. Adobe exemplifies this transformation: what was once a one-time purchase for Photoshop has become a perpetual monthly fee. You pay forever, and often for things you don't use forever.

Predictable Cash Flows?

I once asked a VC which he preferred: predictable cash flows or recurring cash flows. His answer? Predictable, because it means there's less uncertainty about the business.

This makes sense in theory, but in reality our preference for predictability over everything else might be preventing us from thinking more critically about subscription. Businesses and investors alike love models that are easy to interpret and forecast. Customers, in this framework, are modeled like annuities—steady, predictable streams of revenue. In fact, some even describe subscription as a business model where customers resemble annuities.

But here's the thing: customers aren't annuities. Anyone who has ever run a subscription business knows that accurately forecasting LTV is rarely as straightforward as applying a monthly churn rate. This mismatch between how businesses want to see their customers and how customers actually behave creates a very expensive blind spot when it comes to scaling a subscription business. Insisting on predictability from every customer is exactly what limits subscription's potential to scale monetization in the biggest marketplace in the world-- the internet.

Further evidence that subscription is a less than optimal business model for consumer software and services; there are so few big winners in consumer subscription.

Without Better Monetization, the Internet Falls Apart

Subscription is not the only imperfect business model we've relied on. We've already seen what happens when the internet leans too heavily on advertising. Ads monetized the web, but they also hollowed it out:

• Local newsrooms shut down because ad dollars shifted to Facebook and Google.

• Social media platforms prioritized eyeballs at all costs, giving us rage-clicks, echo chambers, and disinformation.

• Search results became a dumpster fire of SEO spam designed to game ad placements.

The result? An internet that's smaller, less trustworthy, and less useful.

People are excited about AI's potential to transform the internet. But what if the constraining factor of AI innovation isn't technical, but economic? In enterprise software, we're starting to explore new flavors of flexible, scalable monetization like performance-based and usage-based pricing. But what about everything else? AI tools like ChatGPT are already nudging users toward subscriptions, and it's just a matter of time before ads appear as well. Is that really all there is?

The Internet Needs New Business Models

The fundamental question is: why do subscription and ad-based models create so much frustration for consumers? Why do they fail to capture the real value of innovation? Does it have to be this way? These questions are crucial as we consider the future of making money on the internet.

Here's the exciting part: no one has figured this out yet. Subscription and advertising each work to a certain degree and for a certain number of businesses, but neither captures the true potential value of the internet. Probably because neither really accounts for how most people use the internet, or how these different business models interact with and shape the products they monetize.

This series is my attempt to start thinking out loud about how we pay for software and services—and how things could be different. Let's examine what's broken and explore potential solutions for a better internet economy.

Thanks for reading

I’m Monica. I’m obsessed with subscription, micro- and behavioral economics, pricing, payments, and the internet. But who isn’t?

Some bona fides

• 10+ years digging ditches for some of your favorite subscription businesses, plus a couple of years in financial services.

• I started a company, Lightswitch, that helps software companies grow revenue by rethinking how they price.

Some disclaimers

• I am not an economist. I just talk to lots of them.

• I write as a means of thinking out loud. This means you shouldn’t take what I say as gospel, and I might revise things I’ve written in the past if I decide that they’re wrong. Let me contradict myself.

Some requests

• Tell me why I’m wrong; email is best or just use the comments

• Work with me

• Share these ideas