Intra-Platform App Subscription Services: Examining Signaling Effects on User-Perceived Quality

In the dynamic interplay between platform owners, complementors, and end users, intra-platform subscription services have emerged as a novel form of value creation. Despite the central role of customer feedback in shaping ecosystems, we have limited knowledge on consumer perception of intra-platform subscription services. Drawing on signaling theory, we examine how the jointly conveyed signal from subscription services affects user-perceived quality of complements. We employ a difference-in-difference framework and multiple panel regressions on a novel dataset of 3,609 app-month level observations from the U.S. launch of the Google Play Pass program. We find that participation has a negative effect on user-perceived quality, induced by a dispersion of complement quality in mature ecosystems and discrepancies between user expectation and experience. We describe selective endorsements and complement reputation as contingency factors mitigating the negative effect. Our study marks an important contribution to signaling theory and advances IS literature on platform ecosystems.