Good growth potential and less sensitive to economic conditions
Focus on stable cash cow role
Naver expands Plus membership
Kakao introduces mobility subscription
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As the subscription service market is growing rapidly, major domestic and foreign big tech companies are competing to launch new subscription services. The analysis is that the company is paying attention to the fact that by expanding its membership, it can not only secure loyal customers for its platform, but also serve as a practical cash cow.
According to the information and communications (IT) industry on the 19th, ‘Papago Plus’, a paid subscription artificial intelligence (AI) translation service launched by Naver at the end of September, has recently had subscribers switching to a paid subscription after the one-month free trial period ended. They are coming one after another. A Naver official explained, “Paid sales are being generated not only domestically but also overseas,” adding, “Inquiries about adoption are continuing not only from individual users but also from businesses.”
Papago Plus, which was introduced as a paid version by strengthening the functions of the free ‘Papago’ service, is characterized by subscription fees ranging from a minimum of 13,000 won per month to a maximum of 75,000 won depending on the function.
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Naver’s representative subscription system, ‘Naver Plus’ membership, will subdivide the benefits provided to members according to their life cycle starting next year. It is expected to be a way for individuals to choose the benefits they need according to events for each age group, such as marriage, childbirth, moving, school admission, and pet care. Starting at the end of this month, Netflix access will be added.
Kakao plans to launch the AI mate app ‘Canana‘ as a subscription model, which will be released to the market as early as next year. Recently, through its affiliate Kakao Mobility, it is piloting ‘Kakao T Members‘, a 4,900 won monthly paid subscription service that provides benefits such as discounts on Blue Partners, an automatic taxi dispatch service, and point accumulation when using Kakao Navi or Venti/Black.
Initially, beta testing began with a target of 10,000 people, but the company explains that more users are using the service. It is also expected that it will be converted to an official service in the future.
We also plan to expand the subscription service within KakaoTalk, our core service. We plan to launch contextual conversations and new chat services within KakaoTalk as new subscription products.
This strategy to secure subscription customers is also a trend in the global IT industry. It is basic to provide differentiated benefits only to paid subscribers, and in particular, a strategy is being implemented to provide more benefits to higher-level members even if they are members of the same membership.
Spotify, a global music streaming service company, announced on the 13th its plan to introduce a premium subscription system that includes advanced features such as lossless audio. It is expected to create a ‘super premium’ level that is about $5 more expensive than the current premium level of $17 to $18 per month.
Since last year, Instagram has been running a paid subscription service in Korea that allows creators to provide exclusive content such as reels, live, and stories to subscribers. According to Meta, the number of subscribers reached 1 million as of the end of last year.
TikTok has launched a subscription service for some creators in major countries such as Korea since last September. Creators can provide exclusive content such as videos, live shows, and notes exclusively to paid subscribers.
Since March of this year, This service is only available to premium or higher subscribers among X’s subscribers, which are divided into basic, premium, and premium+.
The reason that domestic and foreign big tech companies are all working to strengthen subscription services is because they are paying attention to the advantages of subscription customers. In relation to this, Kakao CEO Chung Shin-ah explained in a recent conference call related to third quarter performance, “Although subscription sales are small in absolute size, they are less sensitive to the economic cycle and can grow stably.”
In the case of Naver, the number of Naver membership subscribers is not disclosed. However, they explain that loyalty is so high that the rate of people maintaining their membership every month without canceling it reaches 95%.
There is also an intention to participate in the rapidly growing subscription market. According to KT Economic Management Research Institute, the size of the domestic subscription economy market is expected to expand from 40.1 trillion won in 2020 to 100 trillion won next year.
The fact that OpenAI’s monthly subscription service has become a global success story is also acting as a factor in causing companies to take similar steps. Currently, the number of OpenAI weekly active users (WAC) exceeds 200 million, of which approximately 10 million are paid subscribers who pay $20 per month.
What are the financial implications for big tech companies transitioning from advertising-based models to subscription services, especially in terms of revenue stability and growth?
Welcome to World Today News! Today, we have two esteemed guests, Ms. A, an industry expert in digital marketing, and Mr. B, a financial analyst specializing in the IT sector, to discuss the implications of major domestic and foreign big tech companies expanding their subscription services.
Let’s begin with Mr. B. Can you share your insights into why these companies are focusing on subscription services as a revenue model, and how it differs from their traditional advertising-based models?
Moving on to Ms. A, could you please elaborate on the challenges that companies face in retaining subscribers and providing them with unique benefits that justify the monthly fees? What strategies do you think they should adopt to ensure customer satisfaction and loyalty?
