Hello, I’m Yury Fedorchuk, currently serving as CPO of Monetization at FunCorp, where we develop entertainment products for millions, primarily in the U.S. market. My background includes roles as CPO of Monetization in VK E-commerce and six years building the myTarget advertising platform at VK Company. With about a decade of experience in advertising from various perspectives – advertiser, platform developer, and now publisher – I initially planned to discuss advertising. However, I’ve decided to share a fresh case study from this year instead.
Our focus is on iFunny, a mobile application that serves as an entertainment social network featuring memes and videos. Advertising has been the primary revenue source since its launch when the Daily Active Users (DAU) reached 5 million. Upon joining the company a year ago, we implemented numerous new ideas, resulting in a 25% increase in revenue.
However, we hit a plateau in advertising revenue growth. Adding new ad placements began to negatively impact user experience, draining battery life, reducing frames per second, and causing phone lag. To complicate matters further, iOS users generate less ad revenue due to Apple’s introduction of mandatory permission for the IDFA (Identifier for Advertisers) three years ago.
This situation led us to consider implementing a paid premium subscription, starting with the iOS platform. But we faced several questions: Is it easy? Is it profitable?
Step 1: Subscription Benchmark
We began by estimating potential earnings through a financial model in Excel. While any tool can be used, the key lies in the numbers and logic. We examined market benchmarks from competitors regarding subscription retention and conversion rates.
We also considered advertising cannibalization, as subscribers wouldn’t be shown ads. Minimum prices were based on ad revenue from Android users, anticipating a future subscription launch on both platforms.
Benchmarks
For benchmarks, we set a conservative initial goal of 0.5% of Monthly Active Users (MAU) subscribing, with a long-term goal of 2.5% MAU. It’s important to be realistic in B2C markets and not expect the same membership rates as platforms like Discord.
Step 2: Subscription Concept
Strategically, we decided to invest significant time in developing the subscription. We chose to offer several benefits at once, making it clear to users that we would continually add new premium features. While it was possible to roll out features separately, we feared that a weak initial offer might disappoint users and prevent them from giving us a second chance.
We started with user surveys, collecting both our ideas and those of users. We conducted qualitative surveys and leveraged our Discord group to ask: “What features do you want most?”
Following this, we conducted quantitative surveys using in-app poll functionality to understand what interested a larger audience.
Step 3: Feature Scoring and Development Plan
The third step involved scoring ideas based on their value and development cost. Here’s what we prioritized:
For instance, we decided against developing “Extended analytics” due to its higher development costs.
Step 4: Dedicating a Focused Team and Starting Development
While it may seem like a simple project, it requires dedicated resources. Don’t expect it to take just a few days. With a separate team of four people, it took 1.5 months for development plus 2 months for A/B testing.
The team consisted of:
- iOS engineer
- Backend developer
- QA specialist
- Product manager
Step 5: Pricing
As development began, we had time to better understand appropriate subscription pricing. It’s a complex question: what price will users choose? During financial planning, we determined the minimum adequate subscription price for us, but we needed to ensure users were willing to pay it.
We know that Cosdev’s price survey method doesn’t work effectively; users tend to dramatically underestimate what they’d pay in such surveys. Instead, we looked at competitors’ subscription prices. After all, users are unlikely to pay more than they do for services like Netflix or YouTube.
We tested price elasticity while developing the subscription. We ran banner ads with different price points on equal groups of users. When users clicked, they were directed to a “thank you for your interest” page. We assumed that the highest click-through rate (CTR) would correlate with our future conversion rate. The price point of $5.99 emerged as the winner.
Premium Subscription Rollout Process
5% Rollout
We started with a 5% rollout to collect bugs and feedback. Before expanding to a larger audience, we tested the value of the “No ads” feature itself.
We introduced two tiers:
- Basic – with ads
- Plus – without ads but at the same price
We found that the conversion rate for the Plus tier was higher, though not dramatically so. Eventually, we decided to offer both tiers to all users. Currently, about 20% of our paid customers have chosen the basic tier.
Analyzing Entry Points
Entry points for subscriptions are crucial, as users often make spontaneous decisions. At a 50% rollout, we introduced a new entry point: saving videos. This dramatically increased conversions, and now about 30% of subscriptions come through this entry point.
100% User Base Rollout
After three months, we rolled out the subscription to our entire user base. While we haven’t yet reached a subscription plateau, the number is gradually increasing, though we can see the limit approaching.
Great, But Let’s Keep Working
The process doesn’t end here. We’re now focused on internal marketing to attract newcomers and adding value to the subscription with new features. Some examples include:
New Entry Points to Paywall Onboarding
Adding Subscription Value with New Features
- Adding external links to profiles
- Customizable profile pages
- Additional collections beyond the free limit of 3 “Collections-Favorites”
Experimenting with Subscription Type/Time and Paywall Design
For testing purchase page and paywall designs, there are three options:
- Conduct gradual A/B tests and monitor store reviews (time-consuming)
- Develop in-house technology for testing without store reviews
- Integrate external platforms for A/B tests, such as purchasely.com, adapty.io, or revenuecat.com
Working with Retention and Win-Back
Once the initial growth phase is complete and you’ve accumulated a base of unsubscribers, focus on retaining and reclaiming users. Consider offering limited-time discounts:
- Trigger 1: Send a special discount offer 24 hours before subscription expiry if a user has turned off auto-renewal
- Trigger 2: Send a special discount offer a few days after subscription expiry
For inspiration, you can refer to services like theappfuel.com/flows.
Conclusion
- Evaluate your model and resources, then formulate an action plan
- Experiment and test as quickly as possible
- Listen to your customers, logic, and intuition
- 90% of success comes from adding value, effective onboarding, and appropriate pricing
