Would you pay a subscription for ad-free Android and long-term updates?

“There is a price to be paid for doing things better, a price to be paid for leaving things as they are, a price for everything.” – Harry Browne

The introduction of low-cost, high-performance smartphones in recent years has brought about a huge change in the business model of smartphone sales.

To highlight the most prominent example, Xiaomi’s initial focus on low-cost phones turned the smartphone industry on its head in markets like India in more ways than one. For smartphone buyers on a budget, the most immediate and obvious change has been the widespread availability of high quality, affordable hardware. But there was a price that had to be paid somewhere.

Yeah, I’m talking about ads and bloatware. On phones from Realme to Oppo to Redmi, bloatware is often disguised as helpful pre-installed apps. Ads that take over the lock screen or home screen are now accepted as part of the deal when purchasing a budget phone.

This problem was exacerbated by the increasing commodification of hardware. As high-performance components have become cheaper, the number of smartphone options on the market has increased.

This race for the most hardware bang for your buck isn’t too difficult to lead, and it was a breeze for brands to copy the model ad nauseam with a few minor variations. However, there is a cost to be paid for cheap hardware, and it comes from the software.

Your phone is now just a carrier for a company’s Internet services, and there is an expansive ecosystem of microtransactions taking place right in the palm of your hand. These microtransactions take place in more than one way, often without the users realizing it.

The most obvious type of monetization, of course, is the overt advertising that is distributed through home screens, lock screens, notification bars, first-party apps, and sometimes even settings menus. Your idle lock screen or the white space in apps have become the most important billboards for advertisers.

Analytics gathered from these ads, such as what you click on and how much time you spend viewing an ad, is much more useful to advertisers than traditional ad space. It’s real, actionable data, and advertisers are happy to pay for it.

Smartphone shipments in markets like India run into the hundreds of millions each year. Most of these devices are sold at breakneck prices and hardware sales are predictably limited. In fact, some brands like Xiaomi are keen to keep their margins below 5%.

Recurring advertising revenue, however, makes up for the hardware cost deficit. The profit potential is high enough that even premium brands like Samsung are now brazen enough to include advertising in their high-end options.

Something has to change.

Software updates are a mess, but how can they be fixed?

Advertising and gas aren’t the only problems. The other big thing is software updates. Even if it doesn’t look like it, the bad software updates problem is directly related to the previous problems.

Smartphone shipments are important to any brand, but they become doubly important when a major source of income is what is known as “internet services”. The higher the volume, the larger the user base, the more ads need to be served and the more money can be made.

An easy way to add volume? A steady barrage of minor upgrades and variations. This constant drive to sell new hardware and flood the market with options has resulted in a mess of software updates. From dubious schedules to limited or non-existent software support, the best you can hope for seems like two major software updates on an unpredictable date.

Continue reading: Which manufacturer is the fastest to update their phones? (Android 11 edition)

Sure, Samsung and OnePlus are getting better and better at providing long-term support for their phones. Unfortunately, these three year updates are only limited to premium devices. It’s the entry-level and mid-range hardware that really suffers. The OnePlus Nord N100, for example, gets a pathetic promise of single updates, even though it packs more than just usable hardware. Simply put, it’s not enough.

Unfortunately, it’s important for businesses to maximize their profits, and the cost of supporting an entry-level phone could well outweigh the potential revenue from it. Long-term software support requires a dedicated team that works on the phone, tests and issues monthly patches. Major Android updates require investments in license, certification and deployment costs. For many smartphone manufacturers, the calculation simply does not fit between the variety of variants and costs.

Subscription-based software support could be a solution

However, there could be a solution: A premium tier with an ad-free experience and the promise of longer support could strike a balance between hardware costs and software support.

Before you chew me up, there is a precedent for this. The Amazon Kindle comes standard with ads. A $ 20 fee removes this. For people who don’t care about the ads, it’s a price cut on the hardware. And if you value it, you have the option of getting your preferred hardware free of advertising for a small one-time fee.

Likewise, desktop software such as Microsoft Office or the Adobe Suite often includes a predefined support period, after which users are expected to pay for the upgrade to the latest level.

Smartphone makers, especially those who make budget devices, could incorporate a one-time fee or monthly subscription in exchange for better software and support. To really drive adoption, manufacturers could even add extras like cloud storage like we saw at the OnePlus Red Cable Club in India, or discounts on ecosystem products.

Of course, not every buyer will upgrade to a premium version of the software, but enough. If our survey estimates are correct, most buyers will want more than three years of support, with at least three years just behind.

Even a small percentage of the millions of smartphone shoppers could generate enough revenue to make it work.

Xiaomi made a whopping 23.8 billion yuan (~ $ 367 million) from its internet services business in 2020, and that number is only growing. There is simply no incentive for brands to give up all of this money on the table.

However, the revenue from a premium software subscription could cover the cost of maintaining a team to manage updates while unlocking an ad-free experience. It would also be an easy PR win and a possible solution to the image problem budget-minded brands have in India and elsewhere.

It’s not ideal, but having options is always great

For better or for worse, the ad-supported model works for the Indian smartphone industry. But it doesn’t work that well for the millions of shoppers who have been affected by the terrible side effects of this model. A subscription model could be the way out. It could reduce costs for buyers and make quality software more accessible while guaranteeing sustainable income for the manufacturer.

Do I want this to be realistic? Absolutely not. In an ideal world, your smartphone should be completely yours, both in software and hardware. However, the state of the smartphone market in regions like India is such that no brand wants to risk breaking the status quo. Smartphone buyers are so used to cheap hardware that trying to return to higher prices would be pointless. Check out HMD Global; All of its shit consisted of quick updates and a clean, ad-free software experience, but it barely makes a dent in market share.

In addition to affordable hardware, would you pay for a premium software service if it gives you a better software experience and promises long-term updates?