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Why some creators prefer selling online courses over subscriptions
PLUS: Why a newsletter decided to launch its own investment fund
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Why some creators prefer selling online courses over subscriptions
When the history of the Creator Economy is written, I have no doubt that Kevin Kelly’s “1,000 True Fans” essay will be cited as one of its founding documents. Published in 2008, it posited that the internet’s low-cost distribution makes it possible for a single creator to generate a full-time living through just 1,000 of their fans paying $100 a year for their work.
The theory was enticing because it made a career as a creator seem so obtainable. After all, there are over 7.8 billion people on this earth; surely it’s possible to carve out a measly 1,000 of them and convert them into customers. Over the past 15 or so years, thousands of subscription businesses were launched on the back of this concept — first as one-off publications like Stratechery and Hotpod, and then via platforms like Patreon and Substack. It probably wouldn’t surprise you to learn that a huge portion of Substack newsletters price their subscriptions at exactly $100 a year.
But here’s the thing: subscription economics are brutal. It turns out that 1,000 isn’t the measly number we thought it was, and that it’s actually incredibly difficult to get consumers to agree to recurring payments on their credit cards. Creators are quickly realizing that the uphill battle against subscriber churn can be grueling, especially since the model doesn’t really allow for vacation or rest.
That’s why we’re seeing more and more creators eschew subscription models entirely in favor of other digital products that are easier to sell. While these products can range from ebooks to physical merch, one of the most popular categories right now is online courses. Vox published a good deep dive on the courses trend, opening with an anecdote about Kat Norton, a popular TikTok creator that specializes in content about Microsoft Excel:
No one, not even Norton, could have predicted what a gold mine she’d stumbled upon: Within two months of opening the original course, she says, she earned more from class sales than she made at her corporate day job (which included, among other things, training people how to use Excel) which she’s since quit to be Miss Excel full time. She now estimates she works about 15 hours a week, spending the rest of the time exploring the outdoors in Sedona, Arizona, with her boyfriend, who handles sales for the company. So far, they say they’ve enrolled more than 16,000 people; there have been multiple occasions on which they brought in more than six figures in a single day, claims confirmed by documentation reviewed by Vox. “It’s when I do the webinars,” she says of the live classes she streams from wherever she wants whenever she wants, “those are the massive cash influx days.”
This begs the question: is selling online courses really all that different from selling digital subscriptions? In both cases, you’re creating digital content and asking users to pay for it. Why is one model superior to the other?
But they actually are different in several key ways, and I can definitely understand why many creators prefer them over selling subscriptions. Let’s run through them:
Users are reluctant to sign up for recurring payments
You’ve probably noticed that the Creator Economy is not the only industry that’s embraced paid subscriptions. The model can be found with everything ranging from meal delivery to cloud software. The reason so many companies love subscription models is because they produce predictable, repeatable revenue in such a way that guarantees a longterm relationship with the customer.
But that’s also precisely why customers have grown much more skeptical of subscription products: they realize that they can quickly add up to a lot of money being drained from the bank account on a monthly basis. It’s because of this that they apply a high level of rigor to subscription payments vs other types of transactions. The perceived value must be much higher because they know there’s an added layer of friction for when they want to stop using the product.
That psychological hurdle doesn’t exist with online courses because they only require one-off payments. Users are more willing to spend money on things when they don’t have the added burden of some day canceling payments.
Courses have a more finite purpose
A course typically has a clear beginning and end, and it’s usually oriented around learning a definable skill. It’s easier to justify paying for something when you’re aiming for a clear outcome — whether that’s becoming proficient at Excel or learning how to make your own beer.
Subscription models are more nebulous in terms of defining value. By definition, they don’t have an end date, and their value is delivered in aggregate. They rarely teach you a new skill; instead, they merely keep you informed about a rapidly-evolving industry or topic. Because of this dynamic, it’s much more difficult for the end user to ascertain whether they’re actually getting their money’s worth, which makes them much less likely to subscribe in the first place.
Courses are more evergreen
Subscriptions are a hamster wheel where the perceived value depends largely on how much high quality content you produce. The second you step off the wheel, that value begins to plummet and your churn increases. It’s incredibly difficult to take vacations or breaks when you’re running a solo subscription operation.
Online courses, on the other hand, are usually evergreen in nature and continue to be relevant long after they’re produced. The creator still needs to work hard to build an audience and convert them into customers, but it’s much easier to drive those conversions in a more passive fashion, especially if you generate a lot of SEO-friendly content that can pull readers down through a purchase funnel.
The evergreen nature of courses also allows for creators to spend more of their time on producing free content, which plays a much larger role in audience growth. The problem with subscription models is that you lock so much of your best content behind a paywall, which means it can’t be easily shared. This slows down growth considerably.
I should probably end by noting that not every creator niche is optimal for online courses. If you’re covering the energy market, for instance, the industry is evolving and changing at such a rapid pace that I doubt you could produce much sellable evergreen content around it.
But if you’re operating in a less volatile niche, then courses might be the preferable route, especially if you’re in the earlier stages of building your audience. While the “1,000 True Fans” theory is still just as relevant today as it was in 2008, there are many ways to service those fans. Too many creators default to subscriptions before considering all the other options.
What do you think?
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This newsletter launched its own investment fund
Let’s say you have a pile of money you’re sitting on and you want to invest it. If you decide to invest it in stocks, then it’s incredibly easy to track the value of your investment on a minute by minute basis. But what if you want to invest in a less-regulated asset class like, say, baseball cards or art? How do you even begin to assess the price of these assets, both before and after you’ve purchased them?
You’d probably turn to a guy like Stefan von Imhof. For the past few years, he and a co-founder have been running a newsletter focused on alternative investments. Its weekly installments go deep on various investment categories ranging from limited edition books to water rights, and it now reaches over 85,000 subscribers.
The newsletter is not only monetized through the traditional models, but it also launched a fund for accredited investors, and Stefan’s team has deployed millions of dollars across several asset classes.
In my interview with Stefan, we talked about how he got interested in alternative investments, the steps to launching a fund, and his strategy for acquiring other newsletters.
Watch our conversation in the video embedded below:
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Let's talk about selling online courses
While paid subscription models have been all the rage for the last decade, more and more creators are turning to online courses as a way to monetize their audiences. Their evergreen nature makes them ideal for generating passive income, and many creators have succeeded at selling them at relatively high price points.
But what’s the best way to develop a course that your audience will actually want? And how do you market it to that audience? That’s what we’ll try to answer in a live Zoom call I’m hosting this Thursday.
Featured guests include:
Mignon Fogarty, host of the Grammar Girl podcast
John Bejakovic, a creator behind several copywriting courses
Russell Nohelty, creator of the Writer MBA course
John Gannon, cofounder of GoingVC.com and founder of Venture5 Media
Stephanie Fuccio, creator of several podcast mini-courses
Want to join the call? You can find the login details over here.
This piece does a good job of speaking to the guilt you feel as a creator, especially in the early days when you don't feel like you're contributing enough financially for your family. [Esquire]
I've been testing this new Substack feature out, and at the risk of hyperbole, I'll say that it may end up being the Twitter killer that so many people are looking for. [Substack]
This new Bloomberg product is a potentially interesting use case for ChatGPT. [Nieman Lab]
Amazon has spent billions on original series and films, yet it's still not taken very seriously by Hollywood or critics. Here's a look at why: [Hollywood Reporter]
A good profile of Lex Fridman, a rising podcaster who's loved by libertarian tech bros. [Insider]
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