Subscription Businesses

 One of the most profitable business models to emerge over the last ten years is the subscription cloud business. Companies no longer sell software as discrete purchases, but rather sell software-as-a-service (SaaS) with a subscription license, usually charged monthly. Additionally, companies may charge per user, ramping up their revenue as the network effect makes the software more useful per user. While this business model may cost more for the customers, it often saves customers money on reduced IT costs since the software is hosted in the cloud. The customer gets the latest version and doesn’t need to maintain servers, upgrade software, and install updates.

Depending on the software type, another factor in locking in customers is the important business data and information that these services hold about the customer. The cost to extract or migrate this data to a new application is often expensive and time consuming.

This business model is highly profitable and continues to spread across products and verticals. The model works for selling to large, medium, and small businesses. This model generates consistent revenues all year, but revenues can vary based on when and how price increases are applied.

In future blog posts I will cover the stocks of many of these businesses.

Blog Introduction

While technology stocks crashed during the 2001 bust, they have recovered from those lows stronger than ever. Over the last year (2020) the tech-heavy QQQQ index has risen over 40%. With this blog I plan to chronicle why and how technology stocks have become a stellar investment, and where to look for more investment opportunities in the sector.

Part of my hope for this blog is to highlight lesser known technology stocks that investors may not be familiar with. The FAANG stocks have reached such size and notoriety that they often overshadow the dozens of other technology stocks creating real innovation and incredible, long-term returns.