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By Thomas Baekdal - April 2022

Lifetime values are critical to subscription success

This is an archived version of a Baekdal Plus newsletter (it's free). It is sent out about once per week and features the latest articles as well as unique insights written specifically for the newsletter. If you want to get the next one, don't hesitate to add your email to the list.

Welcome back to the newsletter. I'm currently working on my next Plus report, but it's not quite finished yet. So let's instead talk about lifetime metrics.


The seven lifetime metrics that you need to focus on

Back when we were all focusing on advertising, lifetime metrics weren't really that important. When it comes to advertising, it's more profitable to focus on a large number of random visitors than it is to focus on a core loyal audience.

But as soon as we focus on subscription, this flips upside down. Now random traffic is terrible, and loyal traffic is paramount.

This, of course, is not a new thing. All publishers know this, and, as a result, many publishers are now measuring lifetime revenue as a key metric. But did you know that this is only one of the many lifetime metrics?

So, let's run through them.

Lifetime revenue per subscriber

This, again, is the go-to metric that everyone is measuring. It simply calculates the total revenue that a subscriber has accumulated over time. You would then do an average across all subscribers, which you then set as your average lifetime revenue baseline.

Of course, when you measure this, you also want to look at the "total number of active subscribers". The reason being is that if you are losing subscribers, the remaining audience might still have an increased level of loyalty (this often happens when you polarize your audience, or when you are too niche).

So, you want to be very careful about checking the distribution of your subscribers. For instance, if you have a polarized audience, you might often see that you have a huge number of low-loyal subscribers, and a large number of very high-loyal subscribers, but nothing in the middle.

One way to account for this is to create a subscriber loyalty threshold. For instance, you might say that you don't count a subscriber's lifetime value until that person has subscribed for at least 6 months.

And then you look at what volume of your total subscription reaches the threshold, and then what the lifetime value is after that.

Lifetime renewals per subscriber

This is another very important metric. If you have a single fixed price, this is going to be the same as the lifetime revenue. But if you have a variable price, or a subscription model that consists of several different pricing plans, discounts, etc. then you need to also look at renewals.

"The lifetime renewal rate" simply counts how many times a person has renewed their subscription. Is it 7 months? 18 months? 30 months? That's a big difference.

And again, you then do an average to calculate your baseline metrics. In other words, what is the average lifetime renewal rate?

This is different from looking at your churn rate. A churn rate is (usually) calculated by counting the number of cancellations per month compared to the total volume of subscribers. So, you might have a 4% churn rate.

And over the course of a year, this quickly starts to add up. Let me give you an example: If you have a 2% subscription growth per month, and a 4% churn rate ... this is how that looks over a year:

We start off with one million subscribers, 4% of them leave (40,000), and 60,000 new subscribers come in (2% growth overall). And then that continues month after month.

The result is shocking because it means that, after a full year, about half their original subscribers have left, causing them to need to get more than 800,000 new subscribers. Basically, they have to replace their entire audience every two years.

That's madness!

It's also something we see quite often. A 4% churn rate is not that unusual in the industry.

So the metric that we can use to check this is the "subscriber renewal rate". How many months do your audience in general stick around? And more important, what is the distribution of that? Do you have a few subscribers who stick for a long time, and then a lot of people basically leave within the first year?

This should be a key focus area.

Lifetime metrics to understand consumption (or lack thereof)

Of course, understanding the total revenue or how quickly they unsubscribe is one thing. To fix either of these, we also need to understand why ... and this is where the lifetime consumption metrics come into play.

The first one is:

Lifetime volume rate

The lifetime volume is a very simple metric where you compare the number of articles (or newsletters, podcasts, etc.) that you have published to how many of them each subscriber has read.

So, if you have published 200 articles, and a subscriber has read 47 of them... then we have a lifetime volume rate of 23.5%.

How useful this metric is depends entirely on what kind of publishers you are, or what channel you measure. For instance, if you are a small niche publisher, where you only publish one newsletter per week, then a 23.5% usage rate is very low.

But if you are a massive newspaper like the New York Times, where you are publishing hundreds of articles per day, nobody has time to read all of that, so here a usage rate is less important.

However, I will mention the Guardian here. They cut their production by about 50%, and the result was the usage per article increased. Before this change, they had a lot of low-performing articles. After the change, only a small fraction were low-performing articles.

As they told me:

Pieces below 5k page views were at 33%. Now less than 5%.

But newspapers are a bit of a special category of publishers because they have such a wide focus. So, they are optimizing for a wide selection, rather than a niche.

For niche publishers, however, the lifetime volume rate is critical to your performance. You want your subscribers to engage with as many of your articles as possible. If they don't you are producing too much, and your focus is lacking.

This is even more important when it comes to newsletters or podcasts. Because of the lower volume, now you want every one of your subscribers to ... ultimately ... engage with each and every episode.

This is the same way we think about streaming channels. If people start to watch TV shows like, say, Westworld, then a critical measure of success is what percentage of the total episodes (the volume) they end up watching.

There are currently 28 episodes, so think about what it means if the average lifetime volume rate is only 12 episodes. Right? That would not be good. It's exactly the same for every other publisher.

Lifetime reads

Of course, if you are a very big publisher like the New York Times, here your volume is too high to be compared to the use of an individual subscriber, the metric we use instead is "lifetime reads per subscriber".

This metric simply counts how many articles each person read. And yes, I do mean 'reads', I do not mean 'views'.

So, measure 'reads' and then count that for each subscriber, and then create an average across your audience, giving you the average lifetime reads.

You can compare this to your lifetime renewals to identify whether people are reading more or less than they used to, looking at ways to optimize this further.

Lifetime returns per subscriber

Then we have lifetime returns. Lifetime returns means something very different whether you are a brand or a publisher. For brands, lifetime returns is a metric that counts how many times a customer has returned a product they have bought. And brands are keeping a very close watch on this because many just buy a bunch of things to test it out, only to return those they don't like.

This is often a very big problem because the returned items often end up in landfill.

For publishers, though, this is a completely different metric. We don't send out products, so we also don't have returns. So instead, for publishers lifetime returns means "How many times do people come back for more?"

In other words, it's a very positive metric.

This is an important metric because, unlike views, which people can have several of during a single visit, a 'return' means that there was a period of time in between, after which people decided to come back.

In other words, it's a metric that defines how many times people decide to come back. Or, in analytics terms, how many new unique sessions a person has had.

This is important because that decision, to return, indicates that the person had a genuine interest in what we have to offer.

One thing to note though is that you might need to be careful about how you define this. For instance, you might want to discard all traffic that has a referrer. If you have a person who has come back 10 times, but 9 of them were because they came from Facebook ... did they really decide to come back? Or did they just happen to click on something on Facebook without actually realizing it was from you?

So, you might only calculate this when people choose to come to you directly. So no social referrals, and no search referrals. You can include things like your newsletter or other direct channels. But focus it on the decision.

Lifetime time spent per subscriber

In the same sense another metric that is interesting to look at is the average lifetime time spent. This is another metric that looks at how people use your site.

This is particularly important because a loyal subscriber is not necessarily defined by page views. You might have one person who has seen 20 pages over the past week, and another person who had only seen 10 ... but if the person with the 10 pages has a higher time spent, this person is actually more engaged and more in-depth with your articles.

This is also the same kind of metrics that platforms like YouTube is using to rank their videos. They call it watch time, and a person who has a longer watch time for a specific channel is much more interested in that creator than a person who is just clicking around on a bunch of videos, but never really watching them.

As a publisher, it would also be useful to measure per channel. For instance, what is the time spent for the website, the app, the newsletter, or the podcast?

Or you can even measure this on a per topic basis. What is the average lifetime time spent, per subscriber, per topic? This could help you refine which focus areas your subscribers really like (or find to be important to them).

Lifetime amplifications

Finally, we have lifetime amplifications. This is a very different metric because it measures how many times an individual subscriber has decided to share one of your articles with others.

This tells us two things. First, it's an indication of how valuable a person believes your content to be. The decision to share something is a pretty strong signal that they liked it. And so, measuring the lifetime amplification rate tells a lot about that value.

Secondly, it is also an indication of how effective your current subscribers are at helping you grow further. The higher the overall lifetime amplification rate, the more new subscribers you are likely to gain through that activity.

Keep in mind, though, that this metric is tricky. It can vary a lot depending on your type of audience, and your focus. For instance, business to business publications usually have a lower amplification rate, and the higher up that audience is, the less amplification you will usually get. For instance, a newsletter for CEOs is likely to have an overall low amplification rate compared to a garden magazine.

Also, be mindful of where things are amplified. In the old days, it was all about sharing on social media, but in terms of getting new subscribers, that form of sharing does very little these days.

Instead, you should really focus on the direct form of sharing. Like people sending an email to a couple of friends, or people sending a link to you via direct messaging channels.

This form of sharing creates less amplification volume, but instead you get what we call an 'ambassador effect', where you are using the word of mouth of your existing audience to grow.

If done right, this can really help you.

So, these are the seven lifetime metrics you should be focusing on if you are subscription based. They are all about long-term value, but this is exactly what makes them so important.

The goal, of course, for all of them, is to increase this metric. Get people to spend money for longer, get them to renew for years, make sure they read all your articles, make them want to return more, and get them to like it so much that they choose to amplify it.


Want to know more?

Over the years, I have written many articles about how we can create value for our subscribers. Take a look at:


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This is an archived version of a Baekdal Plus newsletter (it's free). It is sent out about once per week and features the latest articles as well as unique insights written specifically for the newsletter. If you want to get the next one, don't hesitate to add your email to the list.

 
 
 

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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé

 

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