By Michael Evans, February 24, 2024
I’m a huge data nerd. And yesterday, I uncovered something wild.
For the cohort of readers who joined Ream author subscriptions in May of 2023 they are now paying their authors MORE in February of 2024 than they were in May of 2023.
To be precise the Net Revenue Retention is 101% for the cohort readers who joined Ream in May of 2023.
That’s an insane statistic… and I’m going to show you all how it happened.
In short, Ream authors are crushing it… and I want to help you grow your subscription even more.
First, what is net revenue retention?
It’s how much revenue is retained by your subscription over a period of time. Typically, net revenue retention (NRR for short) is analyzed on a cohort basis. Thus, you’d look at subscribers who joined in Month 1 and see how much revenue is retained from them in Month 7 compared to subscribers in Month 2 and where they are at in Month 8.
Net Revenue Retention is the SINGLE MOST IMPORTANT METRIC for the growth of your subscription.
Why net revenue retention, specifically?
Because if you have 100 readers who join in Month 1 and 80 are left in Month 7, the total subscriber count doesn’t equate to your actual revenue.
This is because most authors have *multiple* tiers.
That means that maybe in Month 1 you had 100 readers on your $5 tier paying you $500 a month in gross revenue. But by month 7 maybe that group of 100 readers is now paying you $575 a month with 60 readers on a $5 tier, 15 readers on a $10 tier, 5 readers on a $25 tier, and 20 who have cancelled.
See what’s happening here?
Net Revenue Retention takes into account UPGRADES in your subscription. And for world class subscriptions — your upgrades actually will make up for any churn in subscribers and result in your subscription getting bigger over time from the same COHORT of readers.
Talk about sustainable revenue…
To be honest, these numbers (which are aggregated across the Ream platform) kind of shock me. I wasn’t ever expecting you all to be doing so well… but hey, that’s a great problem to have!
As Ream scales (I think the platform will grow at least 5x this year, but I’ll share totals in the end), it’s totally possible that across the Ream platform we start to see these Net Revenue Retention numbers dip.
But… regardless of how this scales, it shows that at an individual author level it is possible to do much better than these numbers (since this is the aggregate of the entire platform, this counts individual author subscriptions performing worse than this and those performing better).
So how can you increase your Net Revenue Retention (the single most important metric for your subscription)?
Well, the data shares it all with us.
Looking at the graph, in month 1 we can see MULTIPLE months that have above 100% Net Revenue Retention. How is this possible?
This from readers upgrading within their first 30 days — making up for all the churn of readers downgrading.
This shows the importance of:
- Having multiple tiers at different price points.
- Making a CTA to have new Paid Members or Followers upgrade within 30 days since this is when activity is happening.
- If you get a member to stick around for 30 days, most will stick around for a WHILE (usually well over a year… I wish I could say years… but Ream hasn’t existed long enough to know this for sure).
What you see is that typically Net Revenue Retention is consistent for Months 2 – 6. This means that any upgrades and churns cancel each other out (no pun intended) and are likely minimal.
The real surprise in this data for me comes around Month 7 – 8 of each cohort.
Here we can see Net Revenue Retention INCREASING again. This suggests that after 6 months with an author, a certain portion of members are ready to upgrade to higher tiers and unlock more content.
I need to see more data (for more cohorts) to fully understand what is happening here, but my guess is it’s a combination of:
- Authors creating new tiers as their subscription matures and readers upgrading to those tiers.
- Readers who cancelled early on in that existing cohort reactivating their subscriptions.
Either way, the data is fascinating and I hope that unpacking and showing you how Net Revenue Retention works helps you all to grow your subscriptions.
Keep rocking it everyone! These numbers of how well you are doing literally shocked me.
And as always, don’t forget…
Storytellers Rule the World