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In the digital age, money resembles data. What could happen if it could circulate freely and at the speed of light? What benefits would this bring to businesses, and which economic models would be most suited to this evolution? Is the subscription model the only viable solution?

1. Is an all-subscription model the only commercial solution?

This exploration begins with an examination of subscription models, revealing both their advantages and limitations.

1.1 Subscription Model: Advantages and Limitations

Let's examine the advantages of the subscription-based economic model

For Customers:

The subscription offers progressive valorization of the service. Instead of committing with a significant initial payment for a service or an application whose amortization and long-term utility are uncertain, customers benefit from a more flexible approach.

This model avoids the painful threshold effects, where the provider charges for a new version or stops supporting previous versions, in addition to the costs related to the implementation of these new versions. In this, the subscription presents a clear advantage over traditional models: users always have access to the latest available version.

For Providers:

Providers also find their account, notably in terms of regular revenues. This allows them to avoid the need to constantly market new versions to stimulate sales and amortize R&D costs. New versions can lead to a loss of users and require significant marketing efforts to retain existing customers. With a subscription, providers can focus on continuous improvement of their services, thus maximizing the chances of long-term customer loyalty.

Finally, the subscription model reduces the friction of having to go through a payment for each new version. Once the subscription is established, everything is managed on autopilot. For example, it would be impractical to have to enter credit card information for every movie one wants to stream.

In summary, the model is effective because it aligns the incentives of customers and providers.

Despite its advantages, the subscription model is not without criticism.

Subscription Fatigue:

Initially, the subscription simplified the "mental transaction," reducing the decision-making burden of paying for each use thanks to unlimited access for a monthly fee. Today, the proliferation and exclusivity of subscriptions have shifted this mental load towards the decision to subscribe. Fatigue also accumulates through administrative frictions: account creation, sharing personal information, attaching a payment method, complexity of terms of use, and the need not to forget to cancel.

The "Free" Level:

Often, services offer a free level to test the service. However, this level is sometimes so limited that it discourages trial, while the paid version may seem excessively expensive. In some cases, if the free offer is of quality, it is often at the price of the user's privacy. As can be seen with some free messaging services, the user “is the product” as their personal data is stolen and resold.

The First Paid Level:

This level is often deprived of important features but of which the user would not necessarily need frequently. This artificial division of features generally makes sense for a particular market segment, but it fails for other user demographics. This can generate frustrations and push users to look for alternatives.

Moreover, the monthly subscription without commitment is often artificially expensive to push for an annual commitment. This creates a mix of genres: sacrificing the attractiveness of the premium service experience (necessary to win a new subscriber) in order to secure annual volume. And the user is not fooled.

Psychological and Commercial Limits:

The subscription does not necessarily reduce churn (unsubscription rate) or frustrations. For example, a user disappointed with a service for which they have committed annually may feel a frustration similar to that of a user forced to repurchase a product, for example, Parallels Desktop following a MAC OS update.

Moreover, the monthly and annual subscription cycles are completely artificial, not always reflecting the real needs of users. Sometimes the product only needs to serve for 1 day and the provider leaves money on the table with the subscription model. For example, software to clean one's hard drive or get rid of a virus. There is no yield management. It's the price of a glass of water in the desert with a town nearby: the perceived value will be different for each individual, except that in the cold world of the web there is no possibility of negotiating.

Lack of Post-Subscription Innovation:

Some providers, once the subscription is secured, do the minimum and stop innovating. For example, Netflix, with its cluttered, less qualitative catalog oriented towards a teenage audience, or software versions no longer supporting certain essential features (e.g., local folders in Outlook Mac).

Financial Caricature:

The subscription model sometimes values a rather fixed financial vision at the expense of real relevance. It would no longer be surprising to learn that some are considering selling subscriptions for a loaf of bread, an engagement ring, or even a wedding.

1.2 Synthesis: Key Characteristics of an Innovative Economic Model

Armed with these initial lessons, let's summarize the desirable characteristics of a new innovative economic model.

Fundamentals of the Model:

Progressive realization of value
Smoothing of the economic flow
Minimization of payment frictions

Improvements and Resolutions:

Offer a model that is not exclusively based on subscription, but leads to it.
Enable the premium service experience, and if possible, without the friction related to account creation.
Smooth the thresholds of functionality level transitions as close as possible to the user's needs.
Propose more dynamic and personalized pricing mechanisms, rather than fixed and abrupt tiers.
Be able to capture the value of occasional transactions when it corresponds to the user's needs.

If the subscription model undoubtedly brings improvements, it is highly perfectible

1.3 Commercial Opportunities to the Left and Right of the Subscription

1.3.1 "Bundles" or "Super-Subscriptions"

On the "right," super-subscriptions represent an audacious idea in the subscription landscape. Take the example of video streaming services: on average, a consumer has about 1.5 subscriptions (for instance, a subscription to Netflix and Disney+, or just one of the two). A commercial solution could be to offer a super-subscription encompassing several services. However, its implementation is complex. Companies in the same sector often struggle to agree on mutual terms due to differences in competition, strategy, or governance.

Let's imagine a super-subscription for video streaming, what would its pricing be?

If the price is equal to the sum of individual subscriptions:
- What is the advantage for the consumer? Is it simply the ease of managing one account? Is it worth it?
- How could the publishers involved exploit user data and encourage them to opt for a higher level?
If the price is lower than the sum of individual subscriptions:
- How would revenue be distributed among publishers? On what basis would this distribution be made: usage time, overall quotas?
- Why would a successful publisher agree to reduce its earnings by integrating its catalog at a reduced rate in this super-subscription? And what means would the participating publishers have to mine user data and sell them the higher level?

Although the concept of a super-subscription exists in some niches, it seems ill-suited to a competitive market where services seek to differentiate themselves. The obstacles related to the setup and management of such subscriptions make their application difficult in a highly competitive context.

1.3.2 Progressive Realization of Value

On the "left" of the subscription model, let's consider "unit" transactions (for lack of a better definition at the moment).

This approach deserves in-depth analysis to better understand its characteristics.

The monthly or annual subscription at a fixed price assumes that the value perceived by the user is consistently aligned with the value actually obtained. However, this assumption is challenged by several realities:

Variability of Perceived Value: The perceived value differs significantly from one individual to another and from one organization to another.
Fluctuation of Realized Value: The value that the user derives from the service varies over time.
Subjectivity of Reconciliation: There is no universal method to reconcile perceived value and realized value, as they are inherently subjective. Prices, on the other hand, are concrete and struggle against this subjectivity.

Value is measured with each interaction. The subscription model has introduced some granularity in the frequency of this measure. However, can this logic be pushed further? Can we envisage the realization of the value of a service that is even closer to its actual use? That is, progressively with almost "atomic" granularity. What would then be the ideal temporal granularity? Should we opt for a fixed or variable pricing policy?

In the continuation of our exploration, we will address these questions by delving into the possibilities offered by the atomic economy.

Can we envision a realization of the value of a service that is even closer to its actual use? That is, progressively with almost 'atomic' granularity.

The concept of atomic service

Definition: An atomic service refers to a business model where one of the sales levels is based on unitary transactions. This represents a breakdown of the subscription into smaller, more manageable elements. By "unitary," we mean elements like a unit of time, access to specific content, or any other segmentation appropriate to the service offered.

2.1 Step 1: Promote the Premium Level in Atomic Mode to Recruit and Retain

For services that artificially divide their offerings into different functional levels without any real additional cost for the provider, the best strategy is to offer the premium experience from the start. Customers recognize artificial restrictions, as in the example of Calendly Teams versus Calendly Standard.

Positioning the premium experience is an effective technique to attract prospects. This approach eliminates the complexity of choice for the client, clarifies the perception of value, and avoids categorizing users.

Advantages of the Premium Level:

The quality of the premium offer is a key factor in customer engagement and retention. The premium level creates considerable adherence ("stickiness") for several reasons:
Mental Barrier to Unsubscribing: The superior quality of the experience makes the decision to unsubscribe difficult. Only those who really do not need the service will leave.
Functional Barrier to Change: If the client has integrated the premium service into their professional workflow at multiple levels, the effort required to reorganize everything creates a de facto lock-in.

The Intermediate Economic Model: Atomic Sales

We propose an economic model located between the free offer and the traditional subscription: atomic sales. This model combines the premium experience with usage-based pricing, based on the transaction or a fraction of time, adapted according to the service.

Advantages of the Atomic Model:

Offer of Premium Features: This model allows offering high-end features while generating revenue. It also offers the opportunity to gather valuable insights and metrics, thus increasing the chances of retaining the customer and, eventually, converting them to a more traditional subscription.
Reduction of Entry Barriers: Usage-based pricing facilitates product adoption. New customers can start at a minimal cost and then expand their usage as their needs evolve.
Increased Customer Satisfaction: A pricing structure that adapts to the changing needs of the customer contributes to improved satisfaction. With a pay-per-use subscription, customers never feel like they are wasting money on unused features.
Better Retention Rates: Customers having greater control over their subscription costs will be less inclined to cancel due to financial constraints. This explains why SaaS companies with usage-based pricing tend to have higher retention rates.
Effortless Account Expansion: Instead of having to actively propose upsells to users, customers with a usage-based pricing subscription will naturally evolve to higher plans (i.e., volume commitments) as their product adoption progresses.
Accessibility for Expensive Services: For very expensive services or those requiring a significant initial investment (like machine tools or car rentals), the atomic model makes these options more affordable and accessible.

Beyond "Pay Per Use": Why Choose Another Term?

We choose not to use the term "pay per use" to describe our economic model for several reasons:

Inadequacy for Certain Services: The term "pay per use" suggests a model of active use, which does not correspond to all types of services. For example, when it comes to "consuming" content, the term "use" does not seem quite appropriate.
Billing Issues in the Cloud: The "pay per use" model, as commonly employed by cloud service providers, encounters significant billing difficulties. Billing occurs after the period of use, often due to the archaic payment rails of the current banking world, poorly suited to this model. In addition, commercial terms can vary between organizations and over time. The distressing experience of discovering unexpected bills on an AWS console is a glaring example. The user is left in uncertainty about the amount of their bill or the terms that will be applied to them.

We will return to the issue of billing to deepen this problem and explore suitable solutions. Our goal is to develop an economic model that is transparent, predictable, and adapted to the diversity of services and user needs.

"67% of executives are convinced that pay-per-use pricing will gain in popularity, a trend driven by subscribers eager to pay only for the perceived value of their subscription."

"Subscription companies will add local payment methods to better satisfy their subscribers and reduce their costs."

source: Stripe Report on the State of Subscription Management and Billing.

2.2 Step 2: Transitioning the Atomic User to a Subscriber

In our model, a subscription is defined as an offer of discounted pricing or improved contractual conditions in exchange for a commitment to a predetermined volume and/or for a negotiated duration.

Why an Atomic User Becomes a Potential Subscriber:

Accumulated Experience of Value: The user has had the opportunity to measure the value of the service on several occasions and in real situations. This experience allows them to commit with full knowledge, without having been forced into a commitment before fully testing the service.
Understanding the Value of the Premium Level: The user already has access to the premium level and has avoided the frustrations associated with an artificially restricted service.
Established Trust: There is established trust both in the volume of usage and in the relationship with the provider.
Seeking Tariff and Contractual Optimization: The user is in search of tariff reductions for large volumes and/or better contractual conditions (such as guarantees of resource availability or commitments on support), as well as a simplification of the experience.

Another strong point of this approach is the possibility of negotiating the terms of engagement on an individual basis when relevant. This practice is already common in "enterprise" level pricing for some services, often developed "tailor-made." This moment becomes a key step in the customer experience and offers an opportunity for direct and personalized contact from the customer success or sales teams.

Key Challenges of the Atomic Service

Although the concept of atomic service seems simple in theory, it raises two major challenges in its practical implementation:

Economic Model: Clarity and Fluidity
- Calculation and Presentation of Pricing: The first challenge is to design an economic model that is easy to understand and explain to the user. This involves transparent pricing and billing without excessive complexity. The key lies in the ability to present costs in an intuitive way, allowing users to easily forecast their expenses.
Payment System: Efficiency and Speed
- Existence of a Suitable Payment Rail: The second challenge is to find or create a payment system that meets the requirements of the atomic model. This system must be frictionless and capable of processing transactions quickly, ideally at the speed of light. This requires a payment mechanism that can efficiently handle frequent transactions regardless of the amount, characteristic of the atomic service.

Selling a service in 'atomic' mode, based on unitary transactions, is an efficient business model and allows for effective recruitment of new subscribers.

3. Implementing the Atomic Service

3.1 The Lightning Network as the Ideal Payment Rail

To effectively deploy the atomic service, it is essential to have a payment system that minimizes friction and allows for instant, on-the-fly payments.

The traditional banking system is too limited in this regard:

Lack of Flexibility: Due to their architecture, current banking payment rails cannot manage continuous open payment flows in parallel with a user session on a service.
Slow Transactions: The banking process involves 7 to 12 intermediate steps, including verifications, prolonging the time needed even for a simple pre-authorization (several seconds).
Limitations on Small Amounts: Banks are not equipped to efficiently process low-value transactions, leading to pricing model aberrations. (Example: https://www.remove.bg/fr/pricing)
Permissioned System: Access requires a bank account and credit risk checks, as payments for usage-based services are made after consumption.
High Costs: Transaction fees and a minimum per transaction make the system expensive. For example, >1% fees on bank cards and a minimum of a few cents.
Risk of Fraud: Bank transactions are susceptible to fraud risks.
Payment Delays: The time before the finalization of a payment can extend over several days, sometimes leading to disputes and chargebacks.
Account Creation Required: The banking system does not solve the problem of having to create a user account on the service platform.
Not Universal: Constraints related to currencies, borders, and exchange rates, etc.

The Lightning Network: Universal Payment Rail

The Lightning Network, an open payment protocol, radically transforms the way money circulates, making it as free and fast as data transmission on the Internet. Here are its main features:

Peer-to-Peer and Universal: This system operates peer-to-peer and is universal, requiring no intermediaries or authorization for transactions.
'Atomic' Payment Rail: It can handle transaction volumes a thousand times larger and at a speed a thousand times faster than the traditional banking system, and this for amounts of all sizes (for example, 0.004 cents). And with an energy consumption of an order of magnitude lower.
Proven Security: It benefits from the robust security of the Bitcoin protocol layer, which has never been compromised and has been operational for 15 years.
Near-Instant Payment Finality: Transactions are finalized in about 500 milliseconds, thus eliminating traditional payment delays such as "30-day payment."
High Availability (high uptime).
Controllable.
Usable by Autonomous Machines (see our article "a-wallet-for-machines").

For more information on its remarkable efficiency and the advantages of open technologies, we refer you to our foundational article, "The incredible efficiency of value protocols."

With the Lightning Network, payments are made in real-time or on-the-fly; they are no longer static but become dynamic and almost “alive.”

3.2 With the Lightning Network: No Account Necessary

Using the Lightning Network brings an additional major advantage: it eliminates the need to create a traditional account.

Wallet as User Account: With the Lightning Network, the user's wallet serves as the account. This approach allows for simplified authentication thanks to LNURL-auth, an authentication protocol based on digital signatures and public keys. It requires no personal information like passwords, emails, or usernames.

Account Persistence and Personalization: This method also ensures account persistence, allowing the user to be recognized and personalize their settings with each connection to the provider's platform. The LNURL-auth protocol is commonly used via WebLN libraries and QR codes. Services such as BitRefill, LNMarkets, and MASH are already adopting it: https://github.com/lnurl/luds/blob/luds/README.md#services.

Freedom Regarding Identity: The absence of a requirement to use the traditional banking system means that collecting identity for payment verification becomes optional. The provider can choose to require it or not, thus offering flexibility and respect for privacy similar to in-person transactions. For example, it wouldn't occur to us to decline our identity at the bakery or the organic market… why should it be different for an image editing service or an online news article?

Inverse Marketing: Another innovative possibility is "inverse" marketing, where businesses can send promotional messages directly into the customer's wallet, accompanied by small sums of money. This method, consisting of sending, for example, 0.01 cent with an advertising message, opens up the range of marketing possibilities (we will return to this in a detailed article).

Summary of Advantages:

No need for an account creation step.
No need to enter and validate a separate payment method, since the wallet serves as the means of payment.
A high-quality customer-provider relationship, respectful of personal data and innovative in terms of marketing.

The use of the Lightning Network enables a smooth and integrated user experience, where access to the service occurs simultaneously with real-time payment, thus revolutionizing the client-provider interaction.

3.3 Pricing and Billing in the Atomic Sales Model

When it comes to defining pricing in the atomic sales model, several key principles must be considered:

Simplicity: Pricing must be easy for the user to understand.
Coexistence with the Premium Experience: Offering the premium experience in an atomic mode does not necessarily mean reducing the price or decreasing revenue compared to subscription. These two models can coexist as they meet different needs.

Choices for Atomic Sales:

Granularity of Unitary Usage: Pricing can be based on a unit of time (second, minute), a specific quantity of a product (for example, GB), or on a specific action (like converting an image or an API response).
Payment Temporality: Payment is generally made upfront.
Segmentation of Features: Some features can be billed separately, allowing the user to activate what they need when needed, without having to upgrade to a more expensive subscription for occasional use of a specific feature. This avoids “threshold” effects.

Advantages of This Model:

No Quote Necessary: Choice and payment are made simultaneously, simplifying the process.
Simplification of Billing: No complex post-billing process or discount verification, as the user initiates and validates the transaction.
Elimination of Debt Risk: Upfront payment eliminates the risk of non-payment, with automatic service stoppage if funds are exhausted.
User-Managed Payment Customization: The user can choose to validate each payment manually or delegate this task to their wallet according to their own rules (maximum limit, time window, etc).

Pricing and billing are greatly simplified since everything is consolidated into a single step that occurs before the use of the service.

Conclusion: The Lightning Network and the Revolution of Online Service Economic Models.

The arrival of the Lightning Network, an atomic payment rail, enables the flow of value over the Internet as fluidly as other data.

This innovation opens the door to efficient economic models for subscription services. It also allows for a more orderly client-provider approach: first use the service, then commit. A simple decision at a time.

Comparison of Desirable Characteristics for an Online Service with the combinations of the economic model and its payment rail

Some examples of related commercial applications to explore:

Micropayments
Machine-to-machine payments

The Lightning Network represents a crucial technological advancement, now making new economic models previously desirable but impossible to implement feasible. Companies offering subscription services can now gain a significant competitive advantage.

Appendix: Additional References and Resources.

The Atlantic - "Peak Subscription"
- Source: The Atlantic
- Summary: This article explores the idea that we may have reached the "peak" of subscriptions and the associated problems.
Userpilot - Usage-Based Pricing:
- Source: Userpilot
- Summary: This source discusses usage-based pricing, a model that allows businesses to bill their clients based on how and how often they use the service.
Thales Group - SaaS Pricing Models:
- Source: Thales Group
- Summary: This article offers an overview of different SaaS pricing models, presenting concrete examples for each model.
Paddle - Per-User Pricing:
- Source: Paddle
- Summary: This Paddle publication focuses on per-user pricing, a common method in SaaS models where the price is determined by the number of active users.
Lightning Login - Learning about the Lightning Network:
- Source: Lightning Login
- Summary: This site provides educational resources about the Lightning Network, offering information on how it works, its benefits, and its potential impact on online transactions.
WebLN - Developing on the Lightning Network:
- Source: WebLN
- Summary: WebLN is a resource for developers interested in integrating the Lightning Network into web applications. It provides guides, tools, and APIs to facilitate development on this platform.

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