Strengths and weaknesses of subscription data products
I'm building a subscription data product (if you're curious, reach out). I've been thinking about the strengths and weaknesses of this genre of software. Examples of subscription data products are Nielsen, App Annie, and Comscore. Bloomberg, too, in a way.
Here are the strengths and weaknesses of subscription data products, in my estimation. Some of these reference concepts in the 7 Powers framework, which is the best articulation of business moats I've come across.
Strengths:
- Cornered Resource: If the data you have is truly exclusive, it's a cornered resource. That means people can't compete with you because they don't have the data you have.
- Strong Value Prop: Companies need competitive and market intel to make good decisions. If your data product helps an executive make one better decision a year, that's six- or more-figures of value already.
- Scalability: The economic miracle of software businesses is that you can build it once and sell it endlessly. With data products, this is especially true. Whereas SaaS companies need to triage feature requests, data products basically just provide information. It's much more of a what-you-see-is-what-you-get value prop than SaaS.
- Value Accrual: Every day that passes, your data product accumulates more valuable information, adding to the value pile. This means that the longer the product exists, the more valuable it is.
Weaknesses:
- Building scraping agents is much easier than it was before LLMs (see tools like Cursor and Firecrawl). Anyone can do it if they put their mind to it. Someone can copy your data product much more easily today than they could yesterday.
- The TAM for these products isn't huge. The world of executives who need specific data to make crucial decisions is not as large as, say, the market of employees who want to communicate via instant message (Slack).
There are two ways I'm thinking of overcoming these weaknesses:
- Time-series data: This is impossible to replicate, because people can't travel back in time to get past statistics.
- Services: A friend heard from a CRO of a major gaming company that they're no longer signing larger software contracts; they're only signing a blend of software/services contracts, because they want to partner with people to build stuff. Software is being commoditized. I'm planning to basically partner with my early users and co-build the product together, giving them free rein to text me about whatever features and additional data they want. This takes away from the scalability advantage mentioned above, but I think it's worth doing in the early days (and later, on a premium tier).