Not long ago, I subscribed to a relatively-new paid newsletter on Substack called Divination. Don’t judge the newsletter by its name – it’s not a newsletter about how to predict the future with a crystal ball. Rather, it’s a newsletter focused on breaking down business strategies in the technology industry, similar to Ben Thompson’s Stratechery (I’m not being paid for this btw)
A couple of days after my subscription began, the founder of Divination suddenly announced that he’s setting up another newsletter called Everything, and by subscribing to Everything, you can access the member-only content on both Divination and Superorganizers, another Substack newsletter focused on productivity hacks. In other words, Everything is a bundle of two paid newsletters.
Just like every bundled product in the world, it’s cheaper to buy the bundled offering than buying each product separately. In the case of Everything, it’s 57% cheaper than buying Divination and Superorganizers separately! Without any hesitation, I canceled my subscription on Divination (sorry mate!) and subscribed to Everything instead. At that moment, little did I know that I would not only learn something from the content that Everything offers but also write a piece to explain why this kind of bundling is going to be a future trend in the paid newsletter space.
Before I dive into the arguments of why this might be an emerging trend, let me elaborate the whole idea of the bundling, unbundling and rebundling cycle in the tech sector to set the stage.
The Bundling and Unbundling
In the technology sector, there is a continuous cycle of bundling and unbundling. But what do I mean by that?
Let’s use the online classified ads platform Craigslist from the United States As an example.
For those who either are too young or have lived under a rock for too long to know what Craigslist is – Craigslist is a hyper-local classified ads platform founded in 1995 where each user can post his/her request to the site based on the location of the user and the nature of the request. For instance, if a house owner who lives in Brooklyn, New York wants to find a new tenant for his property, he can post the information of his property on the “Housing” category of the site and wait for the users who want to check the property to message him on the site.
Fast forward to today, it has been over 25 years since the establishment of Craigslist and because of the improvement in technology and changes in user behavior (or lack of changes from Craigslist), users are moving away from Craigslist, a site that covers lots of categories, to more niche or dedicated sites as the image below shown.
Among all of those sites, the most prominent one should be Airbnb.
Before the existence of Airbnb, couchsurfing was already a thing: in the past, young domestic travelers in the US would post a request on Craigslist to find a couch in their destination to sleep as a way to save money during their trip.
In 2008, Airbnb was founded and they bootstrapped their website’s traffic by posting their tenant’s request from their site to Craigslist as a way for user acquisition. Later, Airbnb created a better user experience for end users by
- sending professional photographers to the property supplier’s house to take photos (fun fact: initially it was the founders of Airbnb to do this job), and
- building a more streamlined payment and two-way rating system on their platform
Little by little, with the help from enormous VC money and the whole prevailing “sharing economy” narrative, they successfully become a standalone room-sharing platform with tens of millions of users around the globe.
At that point, we can say that the trend of unbundling of couch-sharing or room-sharing is complete:- users who want to find a room to stay will choose Airbnb rather than Craigslist, a site that covers many verticals, of which couch-sharing is just one of them. But Airbnb doesn’t just stop here after unbundling room-sharing from the likes of Craigslist around the world.
From the perspective of the jobs-to-be-done theory, the fundamental ‘job’ that Airbnb’s users ‘hire’ it to do is to find a place to stay. And there are two major players on the market that solve the same need – Expedia Group and Booking Holdings.
As Expedia Group and Booking Holdings start to see Airbnb as a new threat to their business, Airbnb increasingly feels the competition from these incumbents. In response to the competition, Airbnb tries to both get more rooms on the platform by acquiring companies like HotelTonight and provide more adjacent services such as travel activities booking. The harsher the competition becomes, the more we can expect to see that the once room-sharing-focused Airbnb will start to bundle more services under its umbrella. Namely, the unbundler starts re-bundling.
Why Bundling would be a Trend in the Paid Newsletter Space
Now you know that bundling and unbundling trends in the technology industry is like a pendulum that swings back and forth. But why do I think that this will happen now in the paid newsletter space?
1. Less Friction for Both Writer and Reader Now
Nowadays, there are two ways to monetize your newsletter – either by sponsored link or subscription. Newsletters that use advertising to monetize include Podnews (comes with a podcast) and Hacker News Digest; whereas for the subscription model, the writer either builds a site integrated with Stripe or just uses a platform like Substack to charge users for subscription.
However, generally speaking, sponsored newsletters can only work in markets where the residents have stronger purchasing power and have a habit of consuming information from newsletters. That’s why outside of the developed countries (especially those in the West), there aren’t many newsletters that can survive solely relying on ads.
As such, for content creators who live out of developed countries, the subscription model is the way to go.
And thanks to the creation of Substack, it’s easier for writers to offer a paid newsletter (and a bundled one) and for readers to subscribe to one than before.
From the content creator perspective, Substack allows content creators to make bundled newsletters by creating a new publication on Substack with just a few clicks for existing writers on the site. This is much easier than in the past, in which content creators would need to buy a new domain, create a new site, and manage another set of hosting infrastructure.
From the reader perspective, if they are already subscribed to any of the publications on Substack, they are just one-click away from subscribing to a new bundle since their payment information is already saved on Substack. This is much easier than in the past, in which readers would have to go to a new site for a bundle and register a new account and re-enter their payment information.
2. The Bundled Product is Better for Both Writer and Reader
Let’s use some real data from Everything to see how well this experiment went.
According to the author of Divination:
In the past, we (note: the author of Divination and the author of Superorganizers) might get 5-10 new subscribers on a good day, and 15-20 new subscribers on a great day. On the night before we launched the bundle, we had 648 total subscribers between the two of us…”
Since we don’t have more detailed data on the breakdown of the subscriber and the subscriber share between those two writers, here are the assumptions for our analysis:
- Out of the 648 total subscribers, Divination and Superorganizers each share 50% of that
- All of the subscribers are monthly subscribers
With the assumptions above and the data from Divination, we can calculate the monthly revenue for each publication before the release of the bundle:
| Num. of Subscriber | Monthly Fee | Monthly Revenue | |
| Divination | 324 | 13.4 | 4341.6 |
| Superorganizers | 324 | 15 | 4860 |
Three days after the introduction of Everything, again, from the author of Divination:
In the three days since we launched the bundle, we added 180 new subscribers, bringing our collective total to 828. One other cool thing — 274 (40%) of our existing subscribers opted in to the bundle, so we each increased the audience for our paid posts by quite a bit.
Supposing both writers have decided to split the revenue from Everything, and out of that 274 existing subscribers who subscribed to Everything instead, 50% came from Divination and another 50% came from the other.
Here is the updated monthly revenue table:
| Num. of Subscriber | Monthly Fee | Monthly Revenue | + from Bundle | Total Monthly Revenue | |
| Divination | 324 – 137 = 187 | 13.4 | 2505.8 | 4540 | 7045.8 (62% Up) |
| Superorganizers | 324 – 137 = 187 | 15 | 2805 | 4540 | 7345 (51% Up) |
| Everything | 180+274 | 20 | 9080 | – | – |
You’re seeing it right – the total monthly revenue per writer grows over 50% before the launch of the bundled product.
But the benefit of a bundle doesn’t just stop here.
Due to the flexibility of the subscription business model, each month, there would be a certain percentage of subscribers who would cancel their subscription. In the business world, this percentage is known as the churn rate.
To see the tangible impact from the difference in churn rate, we need to estimate the revenue generated from a longer timeframe. In order to do that, we’ve made the following assumptions:
- Monthly churn rate from individual publication is 10%, which means that at the end each month, there will be 10% of paid users canceling the subscription
- For the bundled product, the churn rate is 8% because of its relatively lower price and the variety of the content it provides
- To simplify our calculation, there will be no new subscribers coming in (so the existing subscribers just gradually churn out month by month)
The table below shows the annualized revenue before the bundle:
| Num. of Subscriber | Monthly Fee | Monthly Revenue | Annualized Revenue | |
| Divination | 324 | 13.4 | 4341.6 | 32380.2 |
| Superorganizers | 324 | 15 | 4860 | 36246.5 |
Here comes the annualized revenue after the release of Everything:
| Num. of Subscriber | Monthly Fee | Monthly Revenue | Annualized Revenue | + From Bundle | Total Annualized Revenue | |
| Divination | 324 – 137 = 187 | 13.4 | 2505.8 | 18688.6 | 37554.1 | 56242.7(73.7% Up) |
| Superorganizers | 324 – 137 = 187 | 15 | 2805 | 20920.1 | 37554.1 | 58474.2(61.3% Up) |
| Everything | 180+274 | 20 | 9080 | 75108.3 | – | – |
As you can see, even with the same amount of subscribers, due to the lower churn rate from the bundled product, revenue grows much more over a longer timeframe.
Besides being beneficial to the writers, the bundle would also be a good deal for the readers who are interested in both publications since the price of the bundle is 30% cheaper than subscribing to each publication separately.
3. The Platform Owner (Substack) will Encourage it
If you check the front page of Substack, you can see there are just way too many paid newsletters to subscribe to. The GIF below only shows the top paid publication but you get the idea.
Under these circumstances, the best way for Substack to increase their revenue would be proactively matching writers with similar numbers of subscribers to create a bundled product together. By doing so, as we see in the previous section, each writer in the same bundle will end up earning more, which in turn creates more transaction fees for Substack to collect.
The matching of different writers probably won’t be too hard for Substack given the fact that they already know the readership overlap between each writer on their platform. The data by Everything probably will be used to convince other writers to try out the bundle model.
Compared to the past, since each paid newsletter used a different underlying platform (most of the time), there was not a way to facilitate this easy bundling process that Substack now handles.
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To summarize, due to the ease of creating a bundled publication on Substack and the economic alignment between all of the parties involved, we can expect to see more and more bundles showing up on Substack.
Agree or not? Please leave a comment below.
