AI Tactics Top Subscription Apps Use for Growth w/ Phil Carter

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Introductions, Live Stream Setup, and Beverages

Hello everyone! Happy last livestream of the year.

Ariel introduces the guest:

• Ariel has a cool guest on the stream: Phil.
• The plan is to talk about subscriptions, talk about AI, and drink some tea.

Before getting started, as per tradition, Ariel asks viewers to share what is in their cup and where they are from.

Ariel shares:

• Drinking peach tea today.
• Discovered it is not just peach but peach and orange and some other stuff.
• It is yummy and delicious.
• Ariel is in New York City.
• It is cold; winter has definitely arrived, kind of right on cue.

Ariel asks Phil where he is from and what is in his cup.

Phil shares:

• Originally from Minnesota. He has his Timberwolves hat on.
• Ariel, Frank, and Phil were talking about the Timberwolves hat earlier.
• Phil lives in Colorado now, based in Boulder, Colorado.
• He is looking out at the Flatirons, the beginning of the Rocky Mountains.
• They have their first big snowstorm of the year.
• There is already half a foot of snow on the ground.
• Being from Minnesota, he is fine with that and actually loves snow.
• He is a big snowboarder.
• As for what is in his cup: black coffee.
• He jokes he is not as interesting as Ariel (no peach tea), but it is good coffee and that is what matters.

Ariel talks about coffee habits:

• Used to drink a lot more coffee: one or two espressos a day.
• Would wake up and immediately use the espresso machine.
• Did not like that dependency, so quit cold turkey about a month ago.
• Curious how long that will last.

Phil responds:

• Says good for you and repeats it for emphasis.
• He is still a one-cup-of-coffee-every-morning person.

Ariel explains the relationship with coffee:

• Likes the taste of coffee.
• Does not need it to wake up; enjoys brewing it.
• Likes the act of making it, grinding the beans, the smell.
• Can drink coffee at four in the morning and fall asleep 30 minutes later.
• Has done that many times, especially when writing the newsletter.
• Can write really well after 1 a.m. and is not sure why.

Phil adds:

• He does not share that late-night-writing ability.

Ariel reframes it:

• Says it is not a skill, it is a curse.
• Still wakes up at 6:30 and gets things done.
• Tries not to stay up that late anymore; those days are behind.
• Emphasizes needing to get sleep.

Ariel reminds viewers:

• Let us know what is in your cup and where you are from.
• They are going to get started very soon, just waiting for more people to shuffle in.

Ariel notes:

• This is the last live stream of 2025, which is wild.
• Probably did more live streams this year than in any previous year.
• Plans to do more next year, maybe getting to one a week.
• Thinks it is going to be pretty exciting.

Ariel reads some chat beverages and locations:

• Oatmeal latte in New York.
• Barcelona with a nice espresso.
• Notes Ariel is not the only espresso drinker.
• Clarifies it is not that espresso is unhealthy; the problem was feeling like they needed it, even though they did not need it to wake up.
• That is why Ariel quit, but they will see how long it lasts.

Ariel prompts again:

• As more people shuffle in, asks them to share where they are from and what is in their cup in the comments.

Ariel previews the topic:

• There is a really cool topic and discussion today.
• Ariel has seen Phil give a lot of presentations on subscriptions over the last year plus.
• Thinks this will be an interesting one, especially about how to involve AI.

Ariel clarifies the AI angle:

• They are not talking about how to vibe code your way into making millions of in-app purchases.
• That is not the key of today’s conversation.
• Instead, the focus is how to leverage AI in ways that help your app make more money.
• It is clever; it is the kind of stuff that just works.
• Ariel thinks that is the future.
• Mentions having many thoughts on AI and its place right now and what it could evolve into, which they will probably touch on later.

Ariel emphasizes subscription basics:

• Even understanding the basics of subscriptions and how to motivate people to subscribe to your app is an important foundation.
• Many people glaze over it and assume people will subscribe because it is a subscription app.
• Ariel stresses that is not really how it works.
• That is what they are going to be talking about.

More chat call-outs from Ariel:

• Someone in Madrid with boring water.
• Ariel pushes back that water is not boring; it is healthy.
• Encourages them to continue drinking water in Madrid.
• Hibiscus tea in New York.
• Notes there are a lot of tea drinkers.
• Wonders if they bring that out in people, now that everyone knows Ariel has tea in the cup.
• Ariel says they like it.

Ariel gets ready to start:

• Says it is time and they are ready to get started.
• Mentions having too many screens and too many mice.
• Jokes about losing the mouse and moving between screens becoming normal for the live streams.
• Promises to do that less.

Ariel sees the viewer count climbing and decides it is time to begin the main session.

Main Session Begins: Topic, Guest Intro, and Context

Ariel welcomes everyone:

• Hello everyone. Welcome to a brand new episode.

Ariel frames the AF Chat topic:

• In this AF Chat, they are going to talk about subscriptions, AI, and making more money.
• Ariel has Phil there as the guest.
• Phil has been talking about subscriptions for a long time and saying interesting things.
• Phil even has a slide deck to share.
• They will be talking through that deck.

Ariel prompts Phil to introduce himself:

• Asks Phil to introduce himself, tell viewers who he is, what he has done, and why they should listen.

Phil checks on the slide deck:

• Asks Ariel if the slide deck is up yet or if he should hold off.

Ariel responds:

• Tells Phil to hold off on the slides for now unless he wants them on screen.

Phil agrees:

• Says that is fine and starts his introduction.

Phil’s Background and Career Path

Phil introduces himself:

• His name is Phil Carter.
• He has spent most of his career in consumer technology.

Early career:

• Started his career at Bain in management consulting for a few years.
• Pretty quickly realized he did not want to be a partner at a management consulting firm for the rest of his life.

Move into venture capital:

• Spent about a decade in venture capital.
• Was an associate at Trinity Ventures.
• Did early-stage consumer mobile investing from 2013 to 2015.

Move to Colorado:

• Then moved to Colorado, where his wife Ashley is from.
• He and Ashley have spent the last decade in Boulder, Colorado.

Product and growth leadership roles:

• Spent seven years leading product and growth teams at three multi-billion dollar companies.

At Ibotta:

• Worked at Ibotta, where he was the first product manager.
• Notes Ibotta is one of the few homegrown Denver consumer tech success stories.
• Says it was a fun ride.

At Quizlet:

• Went to Quizlet next.
• Built the growth product team at Quizlet from the ground up.

At Faire:

• Spent a year at Faire.
• Led international, category, and upmarket expansion.

Founding Elemental Growth:

• A little more than two years ago, he went off on his own.
• Started Elemental Growth, a growth advising and consulting firm.
• The firm specializes in helping seed to Series C consumer and prosumer subscription businesses accelerate their growth.

Phil notes:

• He can share more details about the companies Elemental Growth has worked with and the work they do when he pulls up the slide deck.

Phil wraps the intro:

• Says that is him in a nutshell.

Ariel reacts:

• Calls the intro pretty cool and really fast, like a speed intro to Phil.
• Jokes about needing to practice a similarly brief intro, because Ariel usually does not do such a short one.

Ariel moves things along:

• Asks if Phil wants to kickstart the presentation.
• Offers to bring up the slide deck so they can jump right in.

Phil agrees:

• Says, yeah, let us do it.

Ariel brings up the slides:

• Says they are going to bring up the screen.
• Confirms the screen is up.
• Reads the title on the slide: How AI is changing consumer growth playbooks.

Why AI and Subscriptions Matter Now

Phil sets context for the talk:

• Notes that, as Ariel mentioned, he has given a version of this talk in a few different settings.
• Says he was at App Promotion Summit in New York when he and Ariel first discussed the presentation.
• Has also given it at venture capital summits and a couple of other settings.

Why this topic is important:

• Phil believes this is an important topic because consumer subscription apps are easy to launch but hard to scale.
• He plans to explain why in more detail shortly.

AI’s role:

• Phil says AI is creating many new opportunities for creators of consumer apps that monetize via subscriptions.
• At the same time, AI is also creating additional headwinds and challenges.
• Today’s focus is on some specific ways AI is changing playbooks for consumer subscription app growth.

Phil outlines the plan:

• He will start with a bit of background on something he calls the subscription value loop.
• The subscription value loop is a framework for how the best consumer subscription apps grow.
• He will also share data on why scaling a subscription app is difficult, particularly a consumer subscription app.

Format and pauses:

• Phil mentions that they will pause every few minutes and open it up for discussion.
• Ariel will guide him on when to pause.

Once that foundation is laid:

• They will spend the rest of the time going deeper into the three steps in the subscription value loop:
  • Value creation
  • Value delivery
  • Value capture
• They will highlight five tactics for each of these three steps that are being influenced by AI.

Phil sums up the agenda:

• Background on the subscription app economy and why these apps are easy to launch but hard to scale.
• Explanation of the subscription value loop.
• Deep dive into AI-influenced tactics across value creation, value delivery, and value capture.

The Subscription App Economy: Easy to Launch, Hard to Scale

Phil starts the first section:

• Provides context on the subscription app economy, which Ariel probably knows even more about.
• Explains why it is easy to launch these apps but hard to scale them.

Background: Subscription business models in app stores:

• Since Apple and Google introduced subscription business models to the app stores over a decade ago, there has been a huge proliferation in consumer subscription apps.
• There are now more than 100,000 subscription apps across both major app stores.
• It is probably approaching 200,000 now.
• Most of these apps are concentrated in about a dozen categories.

Key categories include:

• Health and wellness
• Productivity
• Edtech
• And several others

But when you drill down into outcomes:

• Of these 100,000 and likely closer to 200,000 subscription apps, fewer than 50 consumer subscription apps have ever reached billion-dollar valuations.
• Fewer than 10 have ever surpassed 10 billion dollar valuations.

Phil notes a caveat:

• The list he is referencing comes from a guest post he wrote for Lenny’s newsletter last year.
• That list excludes some of the rapidly rising AI companies.
• Even if you add the newer AI companies in, the list of massive successes is still not very long.

Public company performance:

• If you drill down further and look at consumer subscription companies that have gone public, like:
  • Bumble
  • Chegg
  • Dropbox
  • Duolingo
  • Grindr
  • And several older companies
• These businesses have seen a lot of volatility in their revenue multiples over the last few years.

Pandemic tailwinds and after-effects:

• These companies did very well during the pandemic.
• There were strong tailwinds:
  • Stimulus spending
  • People spending less money on food or travel
• Once the pandemic tailwinds subsided, there was a mini recession.
• Their revenue multiples plummeted.
• Over the last couple of years, those multiples have started to recover.

Phil’s takeaway:

• This shows that it does not get any easier as a consumer subscription app founder, even if you are one of the lucky success stories.

Why Consumer Subscription Apps Are Hard to Scale

Phil poses the question:

• Why are consumer subscription businesses so hard to scale, despite how easy they are to launch?

He compares them to other models:

• Relative to B2B SaaS or consumer marketplaces, consumer subscription apps generally can launch faster and with less capital.

Built-in advantages:

• They typically do not require sales teams.
• They benefit from fast purchase cycles.
• Most of them do not have to deal with marketplace dynamics.
• They have low marginal costs for adding additional subscribers.
• They tend to have high gross margins.
• Gross margins often improve as the company scales.
• They can leverage the app stores for global distribution.
• They get turnkey support from app stores.

Phil concludes:

• There are many built-in advantages that make it possible to launch a consumer subscription app very quickly.

AI and ease of launching:

• With AI, it is becoming even easier.
• Ariel mentioned vibe coding earlier.
• Phil points out that it is increasingly possible for anyone, even someone non-technical, to launch an app very quickly.

Ariel confirms the trend:

• Says they are seeing that.
• Mentions writing about it for the newsletter.
• Will share data from the App Store in the next few days.
• Notes that the surge in new apps is very big, the biggest in about nine years.

Phil reacts:

• Says that does not surprise him.
• Calls it a positive thing in many ways because it democratizes the playing field.
• More people are able to create their own apps in weeks or even days.

The downside:

• The app stores are becoming even more competitive.
• The main paid user acquisition channels, Meta, Google, and TikTok, are also more competitive.

Phil connects this back to scaling challenges:

• This leads into why consumer subscription businesses are really hard to scale.

Three Core Challenges: Finding, Keeping, and Monetizing Users

1. Finding users is hard

• App stores are crowded.
• When app stores first launched around 2008 to 2010, all you had to do was list your app.
• There were not many apps, so you could get interesting organic search traffic.
• Now, few developers rely on organic App Store search alone.
• Even where they do, visibility is controlled by editors and ranking systems.
• Because of this, many companies end up resorting to paid ads on Meta, Google, TikTok, and other networks to acquire users.
• Those channels are crowded and increasingly expensive.

2. Keeping users is hard

• The average subscriber retention rate for consumer apps is much lower than for B2B apps.
• Consumers are more fickle.
• They have lots of available substitutes.
• As a result, churn rates for consumer subscription apps tend to be higher.

3. Monetizing users is hard

• In B2B SaaS, there is a concept of net revenue retention.
• Even if some accounts churn, the best accounts often add more seats or upgrade to higher-priced subscription plans.
• That can lead to greater than 100 percent net revenue retention, meaning upgrades more than offset churn.
• For most consumer subscription apps, this is much harder because:
  • They often have a single subscription tier.
  • Their customers are individuals, not businesses.
• Ariel adds that a user just needs the one thing and that is it; there is no obvious need for extra seats or add-ons.

Phil comments on emerging multi-tier approaches:

• Notes that some consumer apps are experimenting with additional tiers.
• Example: Duolingo launched Duolingo Max a couple of years ago, based on the new AI features they added.
• More consumer apps that are further along are starting to experiment with multiple tiers.
• Still, it is much harder to design multiple tiers and upsells in consumer than in B2B.

Ariel agrees:

• Thinks it will take another few years before most apps do this sort of tiered approach.
• Highlights that B2B has had nuanced multi-tier pricing for a long time.

Phil agrees with Ariel’s timeline:

• Says totally and reiterates his agreement.

RevenueCat Data: Most Apps Do Not Reach Venture-Scale Metrics

Phil points to data instead of just opinion:

• Says you do not have to just take his word for it; you can look at the data.

RevenueCat’s annual report:

• RevenueCat compiles an annual report.
• The 2025 report includes data from about 75,000 consumer apps using their SDK.

Key metrics in the report:

• Trial start rate
• Trial conversion rate
• Install-to-paid conversion
• Monthly plan retention
• Annual plan retention

Phil highlights a few striking data points:

• Even at the 75th percentile, meaning you are in the top quarter of apps, fewer than 6 percent of installs convert into subscribers.
• More than half of annual subscribers churn after one year.
• More than two-thirds of monthly subscribers churn after six months.

Phil’s interpretation:

• These numbers are not good enough for a venture-scale business.
• If you are a solo developer or someone who vibe coded an app, this can still be fine.
• You do not have outside funding and can build a sustainable business off of metrics that are not great.
• But if you are building a venture-backed business, you need to be in the top decile, top 10 percent, or even top 5 percent.
• That is where metrics really start to support a venture-scale outcome.

Phil references another chart from the same dataset:

• Looking at the 90th percentile, you see significant outperformance.

At the 90th percentile:

• Install-to-paid conversion goes up to around 12 percent.
• Six-month monthly subscriber retention is about 46 percent.
• One-year annual subscriber retention is about 58 percent.

Phil’s conclusion:

• These are the numbers you want to aim for.
• In other words, aim to be in the top 10 percent.

He then poses the key question:

• How do you get there?

The Subscription Value Loop Framework

Phil transitions into his framework:

• Acknowledges that how you get there is a very complicated question.
• Offers a framework he teaches in his courses as a way to think about it.

Phil’s Maven and Reforge courses:

• He has a course on consumer subscriptions that he teaches via Maven and Reforge.
• The foundational framework for the course is what he calls the subscription value loop.

Core concept:

• The best subscription businesses are built on a unique and enduring core value promise.
• This core value promise sits at the center of everything.

What unique and enduring means:

• It needs to be unique because there are so many competing apps.
• You must have something that really sets you apart.
• It needs to be enduring because subscription models depend on long-term retention.
• If the value is fleeting, subscribers will not stay.

Three surrounding steps:

• Around the core value promise, there are three major steps:

1. Value creation

• Typically led by core product teams.
• It is about building and improving the product in ways that create value for users.

2. Value delivery

• It is about getting that value into the hands of users.
• Typically led by marketing, and sometimes growth product or sales teams.
• Covers activities like user acquisition, onboarding, and other ways to ensure users actually experience the value.

3. Value capture

• Typically led by growth product or monetization teams.
• Focuses on pricing, paywalls, offers, and overall monetization strategy.
• It is about turning delivered value into revenue.

Phil explains the loop mechanics:

• The better you get at these three steps, the higher your LTV-to-CAC ratio becomes.
• A higher LTV-to-CAC ratio means your marketing spend pays back faster.
• Faster payback periods support a faster-growing, more sustainable business.

Phil wraps this section:

• About a year ago, he wrote a guest post for Lenny’s newsletter titled The Subscription Value Loop.
• In that post, he broke down 10 specific, proven tactics for growing consumer subscription businesses.
• He briefly highlights that list in the slide deck.

Today’s focus:

• Today, he wants to revisit that framework and talk about how some of those tactics are changing in the wake of AI.
• They will drill down into each of the three steps, value creation, value delivery, and value capture.
• For each, they will talk about five AI-influenced tactics.

Phil concludes this portion:

• Sets up the transition to the next parts of the talk, where they will go deeper into specific AI-related tactics within the subscription value loop.

✨ This transcript was generated and enhanced by AI and may differ from the original video.