Growing Subscription Revenue in a Freemium Product
Wattpad was started in 2006. Remember back then? Shakira’s “Hips Don’t Lie” was one of the biggest hits of the year. George Bush was president. iPhones and Android phones didn’t yet exist. And you could read fiction on Wattpad using a Nokia flip phone.
In the beginning Wattpad was an entirely free app, with hardcore users reading and writing millions of stories. Today we’re proud to say we’re still a free app, enabling a global community of more than 90 million people to read and write in over 50 languages.
As early as 2013 when I first joined Wattpad, we had started to experiment with different monetization models for stories. Back then I was on the content side of things, helping to find up and coming writer/influencers to write stories inspired by The Fault in Our Stars film, one of our first forays into direct advertising. Fast forward a couple of years to when I managed our growth team, with a heavy focus on SEO, signups and retention, and 54% growth in monthly unique visitors year over year. This was an important step in growing our ads-driven revenue based on the size of our total audience.
Fast-forward to now. I’m the Senior Product Manager running our Monetization Growth team with a focus on paid models like subscription and in-app purchases. Once we validated product market fit for our paid products, we applied a growth mindset to help rapidly scale our user-generated revenue streams.
In 2020, with a number of validated monetization models in place, we grew revenue from our paid models like never before. How? I’ll let you in on some of the secrets (read: elbow grease) to our growth.
What’s worked for us can be grouped into four major themes:
- Lower the cognitive load
- Always be optimizing
- Suggest subscriptions at the right moment in a user’s journey
- Use your gut, and Behavioral Economics
Theme 1: Lower the cognitive load
We have 15+ prompts/entries that lead to our subscription paywalls in the app. It was always a two step process, click a button, go to a paywall, subscribe.
One of our first successes was to simplify the flow. From some of our most viewed CTAs, particularly full-screen internal ads, we allowed people to purchase directly from that screen, removing the second step, lowering the friction and doubling the conversion from that screen.
We also experimented with simplifying the decision process on our paywall, to heavily promote one plan (in our first test by using the monthly plan) and a simplified button to increase paywall conversion.
Both these successes operate on the same philosophical principle: we want to make it as easy as possible for people to decide to try our subscription. Simplify, simplify, simplify.
Theme 2: Always be optimizing
Growth is not for the faint of heart. You have to love the hustle because one of our biggest lessons has been how many shots on goal you have to take to find the few that result in a score. For our successful examples above, we had so many that didn’t. The learnings from our failures are just as important as our wins.
Each sprint we try to launch at least one experiment or optimization, often shipping 1–2 small tweaks per platform. It can be as simple as a text change in a button, or more complex A/B tests to understand the impact of heavily emphasizing our annual subscription while also introducing a free trial.
We celebrate wins, learnings and lightning demos biweekly to create space for the team to acknowledge and appreciate each other.
We turn to competitor research often for inspiration of optimizations that work at scale (looking at you Tinder, the New York Times and Duolingo), or UX research like fake door tests or simpler ways to pre-validate larger efforts like surveying our users with different versions of our paywalls to measure their interest, excitement, and the clarity of how we’ve talked about our features.
Theme 3: Suggest subscriptions at the right moment in a user’s journey
Video ads play periodically between chapters in our free experience. We knew from our data that one of our top entries into a subscription was from an existing prompt that happened between chapters, where we’d seen great gains from simplifying the flow.
We knew from surveys and interviews that the majority of our subscribers had joined because they just wanted to read seamlessly on Wattpad, without interruption. The idea was simple: What if we prompted them to subscribe right before and right after they’d had to watch a video ad, when the friction was highest and they could really see the value of going ad-free?
The result worked and together the prompt before and after are two of our most successful entry points into a Premium subscription. Both contributed to substantial increases in trials and conversions.
Theme 4: Use your gut, and Behavioral Economics
Wattpad has a Product Book Club that’s been going on strong for five years. Every month we select a book and discuss it, usually with wine and cheese (ah the days of in-person office wine and cheese).
Last fall we all read Dan Ariely’s Predictably Irrational and it ended up explaining the success of one of our most impactful end of year features.
We decided to introduce a 6 month plan, in addition to our existing monthly and annual plans, as a way to highlight the real value and savings of our annual plan.
We all thought it would work when looking at the designs. Our guts said yes, it made you want to try the annual plan, and now we understood why.
Just two options can make a choice seem harder to make. By introducing a third option, people can start to make important distinctions that will help them choose with confidence.
As Ariely put it: “We don’t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly.”
That paywall redesign resulted in a lot more people trying our subscription, and a substantial percentage of them choosing the annual plan. The positive implications for both our short-term and long-term revenue were significant.
Looking back at the craziness of last year, we learned so much. The themes above drove a lot of our short and long term wins, but they also led us to realize the gaps that remained. Relevancy was so key to our success, we want to lean into that in 2021.
We don’t want to have a firehose approach to prompting subscriptions repeatedly for those who are unlikely to convert. We know that preserving a great free product is essential to our long-term success. So we are leveraging correlation research done by our analysts, and getting help from our data scientists, to make our subscription journeys as relevant and targeted as possible for qualified users. This means that those without the ability to pay, or for whom a subscription isn’t relevant, will see fewer subscription prompts, while those who are seeing a ton of value and are highly engaged in our free product will see delightful prompts at the right moments.
Stay tuned for future posts on the structure of our Monetization team and the norms and traditions that help us work well together and have fun while doing it, even in the middle of a pandemic.
