It appears that some of the larger businesses have hit a ceiling in their chosen business model. Because subscriptions are supposed to be cheap for the average consumer, they are very sensitive to price hikes.
The other problem is that these businesses feel the need to be constantly growing their top and bottom line, which again, because of their chosen business model the consumers of their product are really sensitive to price hikes.
I guess my question is, why do they feel this need? Why not just stop chasing growth and convert their business into a dividend churning machine for their shareholders? It really is the perfect model for steady monthly cashflow.
I think that's a really interesting question. Looking at the tech space, I do think that tech businesses have garnered an image high growth and profits thanks to the FAANG group of companies (or whatever the latest acronym happens to be be) and what they've been able to achieve (best of both worlds).
Just my opinion but perhaps it's easy to get caught up in the notion that as a tech business, you need to and want to be like these giants. Investors are certainly always looking for the next unicorn, so the pressure is always on.
But just because you're a tech business isn't enough to justify charging subscriptions. I think people seem to forget the number of moats some of these tech giants have. Some of them come more naturally due to being digitally-native (e.g., cost advantages) whereas others are difficult to attain just like in other sectors (e.g., intangibles).
The other thing that I've wondered about is the heavy disruption to online advertising and adtech in light of the data privacy changes we've been seeing. There may just be a lot of pressure to find the next "cash cow" business model.
But I agree with you, steady cash flow from subscriptions would lend itself nicely to a dividend-led approach for shareholders. Perhaps over time as tech companies mature further, we may *hopefully* see more of this?
It appears that some of the larger businesses have hit a ceiling in their chosen business model. Because subscriptions are supposed to be cheap for the average consumer, they are very sensitive to price hikes.
The other problem is that these businesses feel the need to be constantly growing their top and bottom line, which again, because of their chosen business model the consumers of their product are really sensitive to price hikes.
I guess my question is, why do they feel this need? Why not just stop chasing growth and convert their business into a dividend churning machine for their shareholders? It really is the perfect model for steady monthly cashflow.
I think that's a really interesting question. Looking at the tech space, I do think that tech businesses have garnered an image high growth and profits thanks to the FAANG group of companies (or whatever the latest acronym happens to be be) and what they've been able to achieve (best of both worlds).
Just my opinion but perhaps it's easy to get caught up in the notion that as a tech business, you need to and want to be like these giants. Investors are certainly always looking for the next unicorn, so the pressure is always on.
But just because you're a tech business isn't enough to justify charging subscriptions. I think people seem to forget the number of moats some of these tech giants have. Some of them come more naturally due to being digitally-native (e.g., cost advantages) whereas others are difficult to attain just like in other sectors (e.g., intangibles).
The other thing that I've wondered about is the heavy disruption to online advertising and adtech in light of the data privacy changes we've been seeing. There may just be a lot of pressure to find the next "cash cow" business model.
But I agree with you, steady cash flow from subscriptions would lend itself nicely to a dividend-led approach for shareholders. Perhaps over time as tech companies mature further, we may *hopefully* see more of this?