Subscription Abuse — What is it and why you should care
Subscription abuse is something many people running a subscription business don’t think about. You have probably heard about or experienced issues with payments fraud, but you may not have seen or thought about people abusing your subscriptions beyond that. Read on to learn about why you should care and what you should watch out for.
So what is subscription abuse? Subscription abuse is anyone violating the terms of your subscription for the purpose of avoiding or reducing payment. While that can sound very legalese there are some fairly common types, some you might have seen or even done yourself!
Why should you care about subscription abuse?
- It costs you real money
- It muddies your metrics both in a positive (wow we have lots of trials!) and negative (our trial-to-paid ratio is bad) sense
- It hurts your reputation, especially when users are buying from account resellers
- It puts your users in danger through others having access to or control over their account
What are the types of subscription abuse?
Account sharing
Using an account meant for a single person or household for more
What is it?
Account sharing is everything from sharing your paid Netflix account with a friend to your whole team using one account for a paid service.
How common is it?
Account sharing is by far the most well known type of subscription abuse. You probably know someone who is using someone else’s Netflix account and that isn’t surprising because over 46% of people in the US share a streaming service account.
Account sharing impacts more than just streaming, 34% of professionals share an account they use for work meaning the odds are if you run a SaaS service that charges per user, you likely have account sharing going on. Obviously if you charge for usage or simply just by features then this generally won’t impact you.
Retrialing
Repeated trialing a service or taking advantage of ‘first’ time perks
What is it?
Retrialing is essentially pretending it is your first time using a product, even when it isn’t. It mostly is a user signing up either with a different email, a disposable/fake email or the same email with a + in it.
This isn’t limited to just trials as the same tactics are also used to get first time perks again, for example $20 off your first order or 1000 credits to help you get started.
How common is it?
Sadly I could not find any public metrics for retrialling. If you have some I would love to hear about it!
Account reselling
Reselling a single account to multiple people or selling trials/hacked accounts at a ‘discount’
What is it?
Account reselling is commercialized account sharing or retrialing. There are sadly many businesses who exist to resell a single user account to thousands of people or sell a new trial account to users each month. These resellers might take advantage of trials applied to team subscriptions and create hundreds of teams at a time each with thousands of users.
Account resellers are most likely to target your top tier as this increases the ‘discount’ they can give compared to your actual subscription price and increases their revenue.
Enterprise offerings that have large numbers of users at a discounted price are also popular with account resellers. Users buying Enterprise Google or Microsoft accounts are good examples of this.
How common is it?
There is no good public research on this, but there have been examples of reseller abuse running ~5% of revenue (eg. for $100m in revenue, there will be abuse in the realm of $5m).
A quick search on Google, Twitter, Youtube or social media will yield many storefronts selling ‘cheap’ subscriptions to pretty much any popular service.
Account sharding
Creating multiple accounts to pool benefits
What is it?
Account sharding is creating multiple accounts to work around a restriction or pool the inclusions from a free or paid offering. An example of this is if a paid plan includes 5 deliveries for free and then it costs after that, it may be cheaper for someone to just create multiple paid plans and ‘shard’ their usage between the multiple accounts.
Another common example is cloud services (eg. AWS, GCP) free tiers which include a month’s worth of VM usage for free, if you wanted to run multiple VMs for free an obvious way would be to create multiple accounts and hope the service doesn’t ban you for doing so.
How common is it?
Unfortunately there are no published figures on this, however in my experience it really depends on the service. I would suspect that AWS has a lot more account sharding than iCloud for example.
Discount Abuse (eg. Education, NFP)
Fraudulently claiming a discount
What is it?
Discount abuse is basically claiming to be something you are not to get a discount. Most commonly this is taking advantage of an education program by using an alumni email from a university, a student id that isn’t theirs or by getting a .edu address from a compromised school.
This is also often combined with account reselling especially if the offering is free for students or other groups.
How common is it?
According to SheerID, discount abuse can be as high as 35% of redemptions for exclusive offers and over 20% of adults have used a .edu email address to redeem an offer when they were no longer a student.
Price Arbitrage
Faking location to take advantage of a lower local price
What is it?
Price Artibtrage is most commonly using a VPN to appear that you are from a different country to get that country’s lower price. Common examples of this are Spotify or Youtube Premium where users VPN into Argentina, India or Indonesia to get local pricing which is often 1/3rd lower than other countries.
How common is it?
There are over 198,000 results for VPN youtube premium on reddit along and a huge number of dedicated sites along with articles on ‘deal’ sites around the web offering guides on how to do this for nearly all popular services. If you offer regional pricing odds to consumers, odds are people are taking advantage of it.
I hope this helps bring some of the types of abuse you can expect when running a SaaS business to light.
Feel free to reach out if you have any of your own interesting experiences with this problem.
If there is interest I will write up how you can find the silver lining from these types of abuse and use that to help grow your business.
