Subscription-Product Fit, Part 1: The Myth of Magical Monetization

Jesse Germinario
12 min readJul 2, 2021


“If you build it, they will come,” is a long dying myth among startups. Its victims are many. The stereotypical story goes something like this: a bunch of brainy engineers build something technically brilliant. It can go to the metaphorical moon, but there’s no market for it. The product, as wonderful as it is in a vacuum, fails. Add great product and design folks to the stereotype and the outcome will end up the same. A brilliant product, without a market, is a failed product.

Out of this cautionary tale was born an elegant dictum: “Achieve product/market fit.” Marc Andreessen laid out the stakes bluntly: “The #1 company-killer is lack of market.” Product-market fit means finding a good market, and developing a product that satisfies the market. Simple, obvious — in hindsight. This advice has since become common sense in the industry.

All good myths die hard, though. A new offshoot of the myth has sprung up in place of the original: “If you achieve product-market fit, they will pay”. By this logic, if you have a product that users love and a market to expand into, monetization will surely follow.

If this presumption isn’t a monetization-killer for all products, it certainly is for subscription products. Such subscription products uniquely include an entirely separate, subscription-locked layer of product functionality. The base product and the subscription product can work seamlessly together — or they can be mashed together with little consideration. Getting your subscription-product fit correct is all about getting this balance right. Subscription-product fit means having a subscription that grows out of your base product, thoughtfully.

“If you build it, they will capitalize you through at least your Series B“ — Kevin Costner, “Field of Deals”

Before we get there, though, let’s continue to consider why monetization gets such short shrift. This presumption — that monetization will follow from good product-market fit — may not be too dangerous when a product’s growth flywheel is fueled by pure user engagement. Pinterest, for example, grows when new users engage with the product by pinning new content, which gets indexed by Google and thereby attracts more new users.

As new users come in through Google/SEO, they see sponsored affiliate content that Pinterest uses to monetize user views. This affiliate content complements Pinterest’s core acquisition and engagement funnels rather than competing with those funnels. There is no subscription paywall that would cause certain users to bounce out of the experience entirely.

The stakes change with a subscription model. Why? Using the product and starting the subscription are two fundamentally different decisions. A user who has signed up for a product has a choice not to opt for the subscription.

In other words, the user can often continue using your product for years perfectly happy on the freemium version of the product, without needing to spring for the subscription. In many cases, they won’t even have to think about what they’re missing in that subscription. In other cases, the user may decide to leave the product entirely after encountering the subscription — for example, if there is a hard paywall requiring a subscription to use any amount of the product. At both ends of the extreme, there are still two fundamental decisions that a user makes: Do I use this product, and do I pay for it?

This use vs pay distinction wouldn’t have been obvious when Andreessen first coined the term Product-Market Fit in 2007. The subscription software model was not in wide usage among consumer services. We take the ubiquity of subscriptions for granted now, but back then you still bought copies of Photoshop and Microsoft Word at Staples, and repurchased them any time a new version was released. Dropbox, an early pioneer of usage-capped freemium consumer subscriptions, was founded in 2007. Apple’s App Store didn’t launch until 2008, and subscriptions weren’t added until 2014. The New York Times didn’t pivot into their subscription model until 2011.

A simpler, subscriptionless time on the Apple App Store

With the introduction of subscriptions and the freemium model, software developers have to ask themselves a question: how much of the product is behind a subscription? This question is usually posed as a tradeoff: the more that’s gated, the more we’ll lose new users. Depending on the rate of VC capital flowing into the company coffers, this question can be deferred for a while — and often is for the sake of reaching as many new users as possible before damming the flow with a paywall.

Eventually, though, money must be made. The question must be answered. The answer is all in how it is asked — does it treat your subscription as a gate, or into an organic extension of your base product?

Want to identify which of the legions of post-product-market-fit freemium products will actually succeed? Look at those that have actually thought about subscription-product fit. Here’s a definition:

Subscription-product fit is when your subscription maximizes both user value and user growth.

Attentive readers will note that I deliberately frame this as a positive: “when your subscription maximizes user value”. Earlier, I had our hypothetical developer ponder this question: “how much of the product is behind a subscription?” This is the million dollar question we all want answered. It also happens to be the wrong question to ask — or, at least, the wrong way to ask the question. Immediately, the subscription is framed as a negative, “behind the subscription” — and in that single connotation a whole host of problems arises, as we’ll see.

Subscriptions are almost always framed this way, as a negative — this framing is endemic to our discourse as product people. We talk about what’s “not available in the free version”, what you have to “pay extra for”, what’s “gated by the subscription”. We ponder “what else we should put behind the paywall” when considering monetization changes. The subscription thereby sounds like this nasty thing that swoops in and takes away value from poor, defenseless users.

Treating the subscription as a limitation results in a subscription development process that looks like an exercise in crossing things off a list: “Here’s our product and… this, this, and this will be locked by our subscription.” Whether or not users care about those items, or whether they even know that they are part of the subscription, are questions often overlooked. The result is frequently a grab bag of “subscription feature” bullets, among which the user often only cares about 1–2 max. Worst of all, the subscription ends up being a bunch of things chopped off from the main subscription.

Here’s a better question framing: “How does the product grow into the subscription?” There are as many ways to answer this question as there are subscription products themselves, an investigation that will be covered extensively in future posts. Here are a few examples for now:

Usage-limited: Dropbox

The Dropbox model pioneered the usage cap with their storage-based service.

How does the product grow into the subscription? A user adds files to Dropbox. As their usage expands, eventually they hit an upper limit and are prompted to upgrade.

Expiring trial: Photoshop

You get 30 days to try Photoshop, then you have to pay to use the product.

How does the product grow into the subscription? A user uses the product for a period of time. If they keep using it past the trial end date, they’ll need to subscribe.

Content-limited: Calm

You can listen to a number of Calm meditations free, and new free meditations will be occasionally added, but 95% of the meditations require a subscription.

How does the product grow into the subscription? A user begins using Calm, listening to a number of meditations. Once they exhaust the free content, they get onto a trial and eventually a subscription.

So if the subscription should offer “maximum value”, why don’t these apps put everything behind a subscription? This question brings us to the second part of our definition of subscription-product fit: “Subscription-product fit is when your subscription maximizes both user value and user growth.”

Pinterest couldn’t have gotten off the ground with a subscription model, because a subscription would have fundamentally interfered with their user growth mechanics. In order to grow, Pinterest needed as many users coming in and pinning/creating content as possible. In general, products that involve user-generated content (UGC) for growth through SEO or other aggregators (Pinterest, YouTube, Facebook, etc), either don’t incorporate subscriptions or do so only at late, mature stages (see Medium, YouTube). Doing so too early interferes with those UGC growth loops.

However, most non-UGC products, including subscription products, also rely on word of mouth growth. These subscription products have a particular balancing act to strike. More value in the subscription means less room for free users to experience the app and tell their friends.

Then again, more subscription revenue is more revenue for paid acquisition growth, and thereby more acquired users who can spread the word. A stronger subscription might also mean more of your user base consists of more committed subscribed users who are more likely to spread the word. Always do the extra work of fully modeling these kinds of trade-offs when focusing on subscription/product fit — you can sometimes have your cake and eat it too.

The obvious objection to this thesis: Why do we need a term like “subscription-product fit”? Isn’t it simple enough to include “subscriptions” in “product” and include this whole argument as part of the definition of “product-market fit”?

In the next post in this series, I’ll fit this distinction of subscription-product fit into a broader framework of model-product fit. But for now, I’ll provide the most practical reason for making this subscription-product distinction: the subscription-product relationship is currently usually neglected. Sure, a subscription might be technically part of a product. But ask any founder or product team, “What does your product consist of?” and it’ll be the rare few who mention “the subscription” anywhere high on their list of more conversation-worthy features.

There are plenty of reasons why we product folks pay so little attention to the subscription:

  • Monetization is often viewed as a necessary evil. Build an app and launch it on the App Store and one of your biggest sources of complaints is likely to be, “It costs money”. In a zero marginal cost market, Internet users are used to getting things for free. The subscription model thereby causes considerable grumbling and indignation.
  • It’s often built in subsequently. As mentioned earlier, the subscription is often added on (or focused on) subsequently for a product initially focused on user growth. The subscription thereby risks becoming an appendage cut off and grafted back on instead of an organic extension of the whole.
  • It’s a hazy priority. Subscriptions are part of the product, but who thinks of it? And who owns it? Product? Growth? Marketing? Is there a separate focus on it at all, or does it just get treated as ‘something that will benefit as the product improves’?
  • It’s not the exciting workstream. Subscription wins are often the result of many small optimization experiments, and result in changes invisible to the end user, expressed in wonky acronyms like ARPU and LTV. Such optimizations are not the exciting thing for product or engineering teams to work on unless contextualized and fit into a more holistic workstream.

Of course, the consequences of this neglect are enormous:

  • Siloing: The severing of the subscription from the product can lead to siloed product teams, where the subscription team has insufficient integration into core product to make the subscription a natural organic outgrowth of the product.
  • Defaulting: The subscription model a company launched with often ends up being the model they stick with indefinitely thereafter. Optimizations take place within limited bounds but don’t fundamentally shake up the preexisting paradigm.
  • Lack of resources: The subscription experience simply gets no attention, or ends up being tackled in a scattershot way by core product teams without the expertise to truly consider the way forward.
  • Unenthusiasm: This is an insidious danger present even in mature product growth orgs. Framing the subscription as a negative makes it the ugly thing to work on. Sure, enough all-hands meetings stressing the importance of monetization on the business will help. But work on subscriptions can be tedious enough as it is — a continuous stream of button copy tests is no engineer’s idea of the startup dream. Why make it harder on them by treating the subscription as an embarrassing necessity instead of as the engine of company growth?

The antidote to much of this thinking is similar to the way I described how we should think about the subscription as product and growth people:

  • Reject the embarrassment and embrace the subscription: Make it clear to the company that the subscription is not something that is optional or something to feel squeamish about. This is especially important when your team is exposed to user reviews that complain about the subscription cost.
  • Seeing the subscription as the product: Fundamentally, we need to make sure we see the subscription as growing from out of the product, not as something grafted on after the fact. This results in more interesting initiatives for the subscription that mirror complex base product initiatives.
  • Making the subscription the best you have to offer: We need to see the subscription as the best the product has to offer, and give it full, holistic attention instead of just treating it as a set of optimization experiments without more robust thought given to the user experience.
  • Celebrating business wins and user growth: Above all, the subscription has to be recognized as the core of your business, without which you don’t have revenue, you don’t have growth — and you don’t have millions of users using the amazing product you built.

For those still skeptical that “product-market fit” is insufficient to capture this argument, I offer an alternative to this new dictum, “Achieve subscription-product fit”. And that is “The product is the subscription”.

Equating the product and the subscription may take my argument a controversial step too far — certainly many apps have freemium experiences that are perfectly sufficient in their own right as product experiences. In many such cases (e.g. Duolingo), I’d argue that ads-monetization is a part of that experience, and therefore consists of a flywheel independent of the subscription. But notwithstanding that objection, here’s why you should believe it: the subscription is the best you have to offer. Whether you hold your subscription at arm’s length or not, you can’t deny that your subscription is the best experience of your product the user can have, unless you are doing something terribly wrong. So why not make the best you have the best it can be, and be proud to call it that?

In no other market would “the product is the purchase” be controversial. No one would deny that “getting a TV” means purchasing it, not sneaking glimpses of your favorite shows for free at Best Buy. Again, in an Internet filled with zero-marginal-cost and superficially “free” services and products, charging money and equating products with their purchase can make us squeamish. However, with subscriptions increasingly on the rise across media and consumer markets and data-monetized “free” services losing their righteous aura with Facebook-esque abuses of trust, the Internet is starting to get over that squeamishness. As the old saw goes, “You get what you pay for”.

In any event, what shouldn’t be controversial is “the subscription is the business”. If you’re an app developer that mostly or solely monetizes on subscription revenue, ignore this at your peril. Getting this right means bringing the best you have to offer to those users most committed to sticking with you: your subscribers. Getting this wrong will hobble your product’s scale, eventually preventing you from reaching any new users as your cost of acquisition inevitably grows more expensive.

That’s a tragedy when you’ve made it this far. That product-market fit of yours is too good to let go to waste.

Continue on to Part 2: Model/Product Fit and the Use vs Pay Distinction



Jesse Germinario