Thread by @fortelabs

1/ This excellent explainer about the economics of bundling by @nbashaw is also one of the key ideas needed to understand online education today

divinations.substack.com/p/bundle-magic

Online courses are bundles, and understanding that helps unlock a lot of things

2/ If you make a course that directly solves just one, utilitarian problem, like “how to make a to do list” or “how to set up a blog” or “how to make cupcakes” them you’re competing with the endless supply of amazing, completely free content on YouTube

3/ Using the example from the post above, you’re like the individual newsletter writers competing head to head with every other writer in their niche on the basis of quality and price. All you can do is be better OR cheaper than everyone else

4/ It’s so tempting to fall into this trap because every “launch” seems to generate so much interest and sales. And course creators like making new things so they jump from one topic to another, chasing customers

5/ But soon you have a menagerie of courses, on different topics, all requiring updating and maintenance, each competing against many other offerings, again only on the basis of quality and price. It’s a hopeless endeavor leading many to quit

6/ I saw this coming after creating only two low-priced, self-paces courses: that each time I started on a new one, I was essentially starting from scratch on a new kind of customer seeking a new kind of outcome

7/ But online learning very much fits the scenario that Nathan identified as being ideal for bundling: customers want a lot of loosely related things a little bit

8/ For my niche of productivity, it’s highly likely that someone interested in productivity is also interested in time mgmt, goal setting, prioritization, note-taking, knowledge mgmt, pers effectiveness, etc. The more they learn about one of these, the more they’ll want others

9/ So instead of creating a dozen little cheap courses on each of these, which I’d never be able to maintain and advance, I wrap them all up in a bundle that costs $1k. That’s my Bldg a Second Brain course

10/ Inside, we touch on dozens of different related topics, with the added value of an overarching course curriculum that shows how they fit together and relate

11/ On top of THAT, we add another layer of personal service: live Q&A sessions, guided exercises, breakout discussions with peers, feedback on their work, guest teachers, etc.

12/ These services are also part of the bundle: most students wouldn’t pay for each separately, and we couldn’t deliver them individually profitably, but all wrapped up together, there’s something for everyone and the rest is bonus

13/ Selling a premium bundled productized service isn’t easy, but it’s easier and far more profitable than running around trying to sell what we know in little tiny pieces to the lowest bidder

14/ It is also vastly more scalable, because the students IN the course themselves become part of the bundle! The community and interaction with others has network effects, because the more (and better) ppl are part of it, the more valuable it becomes

15/ So the next generation of online courses are self-improving bundles where you constantly add new features, justifying increasing price, attracting more and better students, who create better content (through their stories, testimonials, etc), which generates new features, etc

16/ Another way to think of this is you’re combining the uniqueness and defensibility of services with the scalability and network effects of products. Our business has about a 38% gross margin, halfway between typical margin of products and services

17/ The reason that is important is that it allows us to hire the best, invest in improving courses, develop new ones, weather economic shocks, and provide scholarships to those who can’t afford it. While also allowing rapid growth with leverage on our costs

18/ As noted in the article, bundling can go too far, which is why we have 6 different courses we offer. But eventually I’d like to bundle THOSE into an MBA-like year-long curriculum at a significant discount to buying them individually (while also adding extras like coaching)

19/ But there’s another pitfall to avoid, of starting with bundles. As @briantobal explains in this post, schools like the one I described in previous tweet can’t have product-market fit, only courses can

aboutlearning.substack.com/people/2217513

20/ In other words, each item in the bundle has to already have (and continuously improve) product-market fit on their own. Putting multiple losers together doesn’t make a winner. This is why colleges are failing - no one wants individual courses, and bundle is collapsing

21/ This explains why we’re moving toward a federated school model where each course has one instructor, who manages all aspects of that course as a separate business and keeps almost all revenue

22/ It’s so important that there be one leader highly incentivized to continually manage and improve the course bundle, and maintain a personal connection to the audience, that these needs trump the needs of the platform

23/ This points to another interesting possibility: collectives of creators who come together to share what makes sense (infrastructure, staff, facilities, some marketing) while keeping separate what doesn’t (payment systems, email lists, brands, some infrastructure)

24/ Basically, we think we can create a new kind of platform that gives creators leverage without getting between them and their customers. Time will tell if we succeed