| In JC’s Newsletter, I share the articles, documentaries, and books I enjoyed the most in the last week, with some comments on how we relate to them at Alan. I do not endorse all the articles I share, they are up for debate. I’m doing it because a) I love reading, it is the way that I get most of my ideas, b) I’m already sharing those ideas with my team, and c) I would love to get your perspective on those. If you are not subscribed yet, it's right here! If you like it, please share it on social networks! Share 💡JC's Newsletter
🔎 Some topics we will cover this week The New York Time’s subscription-based model and bundling focus has led to higher engagement and retention rates Building a constellation of interrelated Products: The power of bundling and integration Microsoft’s approach of “Doing more with less” Amazon Prime's Bundle Strategy and Its Relevance to Healthcare The Importance of Defining the Product in a subscription-based business model
👉 An Interview With The New York Times Company CEO Meredith Kopit Levien (Stratechery) ❓Why am I sharing this article? The way they describe journalism could apply to health ➡️ Make healthcare worth paying for in a country where people believe it’s free I also liked how they made the hard decision of being subscription first. They describe well the value of bundling for them. I liked “to be essential means to be of value every single day.” For us it would not necessarily mean opening the app, but that we enable daily practices that make you feel better. How content is part of the product experience, how to engage with quality only (not do notifications for the sake of it)
Being worth paying for: The business model was simply to make journalism worth paying for. “…even in the presence of many free, or at the time, mostly free, and then over time, less expensive alternatives” In 2015, which was the year we coalesced around the strategy that it was all about subscription-first and making journalism worth paying for, a big part of why we were able to do that was because the whole company could rally behind that idea.
Becoming essential: Our current strategy, which is based on that idea of making journalism and now a whole portfolio of products worth paying for, is about becoming the essential subscription for millions and millions of people who want to understand and engage with the world. To be essential means to be of value every single day. When we talk about engaging people, we’re saying, “What’s the thing we can do that’s going to let you know or remind you of the value that’s there for you to partake in?” That’s really what I’m referring to.
Content x Product: We now have an incredible body of work in the digital product experience that involves journalists and editors and product people and designers and data scientists and engineers and marketing people, product marketers, who together are saying, “A regular update when something happens on a topic that we don’t normally, as an example, have an update on would be a great way to bring people back to site, because we can inform them more about a developing story. The product experience can evolve to help people follow a breaking news story or a developing news story, and know when to keep coming back to the site or to the app to check in on that story.”
Engage with quality only: One of the things I always say that’s so great about working at The New York Times is we’re not just trying to engage you and get your attention, we’re trying to engage you in things that are generally nourishing or delightful or really worthwhile. The second thing with Wordle that’s just so consistent with our strategy is people play every day, it’s this magical thing.
M&A to add to the bundle: We believe that the knowhow from what we’ve done at The Times is going to apply really well at The Athletic, it already is. We also believe that the two entities together, even beyond just news plus sports, but two different kinds of value propositions that fit together under the same bundle are going to be accretive to each other and to the whole.
The value of bundling: Bundle subscribers retained like 40% better than subscribers to our news product, so that’s great. And then you pushed on price, we charge more, even in a promotional introductory price, we charge more for the bundle, a little bit more. Over time, we expect to be able to charge substantially more for the bundle because we’re giving so much more value for it. Bundle subscribers today pay more, churn less, stay longer, engage more.
👉 Parker Conrad (Rippling) - Building a Compound Company (Join Colossus) ❓Why am I sharing this article? Very good article. I think the summary is a must read :) Strategy: Offering & bundling: Product: Should we build the employee graph? What is our core middleware? What can we make our customers learn on the platform? Build campaigns? How to build the right primitives. I love the idea to build an app shop How they think global first
Team: Making sure that the people at the top of the org chart are operating at the ground level day to day (reading 20 tickets, attending 20 sales meetings or watching the videos…) Hire more founders, and start with small nimble teams. How do we create a tighter internal feedback loop on how we use Alan?
Sales:
Constellation of products: Rather than focus narrowly on one product, he is building a suite of interrelated products simultaneously to carry out functions of HR, finance and IT for companies. There are these undiscovered islands of product market fit just beyond the horizon line that do this thing that people have largely been unwilling to do today, which is to take on a constellation of interrelated products or features and build them in this way where they're seamlessly interoperable and build a company around that. You look at businesses like SAP and Oracle and Microsoft, that's what they're all doing. They all have very broad product portfolios.
Bundling & integration: The overwhelming product and commercial advantages of deeply integrated software and bundled contracting and pricing are going to start to re-dominate and a new generation of megopoly business software vendors are going to emerge. Even though our individual products are often surprisingly affordable for customers individually, the overall effect is that customers end up paying us a decent amount of money because there are so many different problems that we can take on for them.
➡️ Similar with our health stories Employee graph: An employee graph will have, first of all, all of the underlying HR employee data, things like information about compensation and their job and role and function, not just a singular department but an entire department hierarchy and teams and work locations and employment types and stuff like that.
But then it branches off and includes things like what computers are they using because people often use more than one. And what's the operating system on those devices? And how much data has been exfiltrated from those machines in the last 30 days? And how many open pull requests do they have? And what's the oldest open pull request that they have? And how many Jira tickets are assigned to them? And how much equity do they have in Carta, bring all this stuff together? For our company, we can build a report that shows GitHub check-ins by engineer, by team, by manager over the last 90 days.
Middleware components First, that these products are more deeply integrated with employee data and with Rippling overall. The second is that they're built on top of this set of middleware components. The things that we do centrally in Rippling, the middleware capabilities, the products that we build, those capabilities for those products are always going to be one or two orders of magnitude more powerful than any of our stand-alone competitors. No one is going to beat us on reports. No one's going to beat us on workflows, on approval chains, things like that.
Building on the platform: For our clients, if you're a Rippling user and you've taken the time to learn how to do things in Rippling with one of our other products, if you know how to build a report or set up a workflow or God forbid, you've learned RQL, which is the scripting language that's built into Rippling, you have superpowers that apply to you when you buy your next product from Rippling out of the box, you're ready to go.
Team to build: A single and a singular individual, often a former founder, Rippling has just an enormous number of former founders that work at the company that starts and owns this from 0 to 1 and hopefully from 0 to much more than 1, but they're in charge of recruiting the early engineering team, building the product themselves, there are some resources that we give them internally. Usually, the teams that build these products prelaunch are only about 4 to 5 engineers. And usually, you can get to quite a good product, building on the rest of the platform that we have with a small number of people in about 12 to 18 months. And that's generally been the time that it takes.
Dogfooding: We're now a 1,700-person company across roughly 12 to 15 different countries. And I run payroll in Rippling for our offices everywhere around the globe, I manage employee benefits, manage and run open enrollments and set a lot of the device and IT policies and manage that across the company. I use the product day to day, every single day. Actually, over time, it takes up more and more of my time, but there's this constant effort for me and for the teams within the company to keep cutting the amount of work that it requires for me to do this with the business down so that even as we grow, it stays manageable for me. I think that's what gives me the right to have a useful opinion about this stuff. And so a lot of the things that we do come from that, and they come from my own pain points around this.
Primitives: Those concepts are very similar to what you might see with a spend management system. And so a lot of these applications, it's about taking the same fundamental concepts, the LEGO building blocks and remixing them and you get something very different as an output. And so as a result of that, I think that you can build better products with much less engineering investment.
➡️ Health stories & health experience blocks App shop: We have an app shop today, and we have partners in that app shop that compete with our specific products. If you're a team that's building a new application and there's a capability that doesn't exist in one of our underlying components, everyone's first instinct is, go roll your own, that has just your specific use case built into it. We always force people to either build those capabilities down into the underlying systems or get the teams that own that to do it.
➡️ Global first Going deep: When things get screwed up somewhere in sales, where something is not working right. The first thing that I talk with Matt Plank, who runs sales for us about is, "How many Gong videos have you watched of the reps in this segment to see what's going on with their customer interactions?" The answer needs to be 10 to 20, you need to go all the way to ground. And the answers to problems when they come up are rarely data or spreadsheets or charts, the anecdotes are so much more powerful when you can go around on this stuff.
Making sure that the people at the top of the org chart are operating at the ground level day to day. It's rare that I think you see that in the data, and it's much more common that you see that by getting on the ground floor and looking through their code or going through individual support tickets or individual prospective customer interactions, looking at 20 of them until you start to see a pattern and can diagnose the problem.
👉 Microsoft Full Circle (Stratechery) ❓Why am I sharing this article? Same message with our bundle - compare each part and show savings. How with Alan you do a lot more, it is the best return of investment on people you make. With us, you can rest assured that they are comprehensive and are designed to work together.
This “do more with less” message recurred throughout Nadella’s presentation. Three separate times Nadella emphasized how much customers would save by going with a Microsoft bundle, but that was only the “with less” part of the message; each pitch also explained why the Microsoft approach was also better (i.e. “do more”). On average, customers save more than 60% when they turn to use compared to a multi-vendor solution. Nadella’s argument: not only can you save money, but because all of the products come from one vendor you can rest assured that they are comprehensive and are designed to work together. Analytics alone on our data intelligence platform cost up to 59% less than any other cloud analytics out there. With Microsoft 365 we provide a complete cloud-first experience that makes work better for today’s digitally connected and distributed workforce. Customers can save more than 60% compared to a patchwork of solutions.
👉 Microsoft Earnings, Azure’s Slowdown, Office Strikes Back (Stratechery) ❓Why am I sharing this article? Microsoft 365 E5 combines best-in-class productivity apps with advanced security, compliance, voice, and analytical capabilities. Extend identity and threat protection with integrated and automated security to help stop damaging attacks. Bring together information protection and advanced compliance capabilities to protect and govern data while reducing risk. Get audio conferencing and calling capabilities in the cloud to enable your teams. Benefit from Power BI capabilities that help you realize significant business value from your data.
Just about every bullet point on this list is associated with a standalone SaaS product; that also extends into the productivity apps at the base. Consider Teams and Slack: a company might prefer Slack, but when it comes time for belt-tightening, you can certainly imagine a CIO deciding that it is simply not worth it to pay for Slack when the company’s Office 365 subscription already includes Teams. Then, you can extend that all the way down the bullet list: not only do Microsoft products benefit from being designed to work together, they are also cheaper when bundled together, and that’s about as compelling a proposition there is during an economic slowdown.
👉 Amazon Launches Luna (Stratechery) ❓Why am I sharing this article? I feel that the strategy of Amazon Prime in terms of bundles is very close to what we are trying to achieve down the line with the membership fee. We should be innovative about what we are ready to bundle in our offer, while becoming great at discovery of service.
It took me a long time to figure out what exactly Amazon was trying to accomplish with Amazon Prime Video Amazon Prime keeps adding on more and more disparate services: delivery, video, music, video games, photo storage, a clothing service, books, magazines — the Prime benefits page has 28 different items listed! The most valuable impact in these cases is giving you yet another reason to not churn. This makes sense when you remember that the business model for the Amazon Prime bundle is [not just] subscription revenue [but also] increasing usage of Amazon.com. 80% of Prime subscribers start their product search on Amazon, and only 12% on Google, while that split is 50/50 for non-Prime subscribers. Sure, you may find 90% of them useless, along with everyone else, but as anyone who has managed a feature-rich product knows, the 10% that are considered useful vary considerably! Luna and the “Prime Gaming Channel”: it is a customer acquisition channel for selling other gaming channels, it is a competitor for other gaming platforms, from streaming to console to mobile (remember, the true scarce resource is time), and above all it is another reason to remain a Prime customer and do all of your shopping on Amazon.
👉 The Amazon + One Medical Post (Out-of-Pocket Health) ❓Why am I sharing this article? It would make sense to bundle Prime - which I get a little value from pretty regularly - with One Medical which I get a lot of value from very sporadically. That would make the whole bundle much more appealing and I could see them potentially offering different Prime tiers that include health services. Actually, I probably would never have tried One Medical if my employer hadn’t covered it - I only saw the value after using it. That might be the same for Prime members who get a visit included in their bundle, where Amazon can target the particularly valuable Prime customers for One Medical discounts/offers (since we know they have that data). One Medical was founded in 2007 and has been building and iterating on its model since.
👉 Walmart+ Turns Two (The Split) ❓Why am I sharing this article? Walmart+ is an annual subscription with benefits worth ~$1,300 per year: Free shipping on Walmart.com (no order minimum, excludes marketplace purchases) Free grocery delivery ($35 order minimum) Scan & go (scan in-app as you shop + pay from your phone) Fuel discounts at partner gas stations Rewards and further in-store discounts Paramount+ streaming subscription Spotify Premium for 6 months
After a free 30-day trial, customers pay $13/month or $98/year (38% discount) for Walmart+. This compares to $15/month and $139/year (23% discount) for Amazon Prime. If you take the $134 value of Paramount+ and gas savings at face value, Walmart+ pays for itself, a common selling point of similar subscription bundles.
👉 Spotify Audiobooks, Audiobook Business Models, Limitations and Skepticism (Stratechery) ❓Why am I sharing this article? I liked the definition of a subscription: “a subscriber is paying for the regular delivery of well-defined value” and I think it applies to us. I also believe that we are much about “consistency and predictability that means the consumer doesn’t even think about recurring charges.”
It is very important to clearly define what a subscriptions means. First, it’s not a donation: it is asking a customer to pay money for a product. What, then, is the product? It is not, in fact, any one article (a point that is missed by the misguided focus on micro-transactions). Rather, a subscriber is paying for the regular delivery of well-defined value. I don’t think that Stratechery would work if I used the iTunes Music Store model — i.e. charged per article. What is valuable and sustainable is not any one single Article that drives discrete decisions on the part of the consumer, but rather consistency and predictability that means the consumer doesn’t even think about recurring charges.
👉 Netflix Ads (Stratechery) ❓Why am I sharing this article? Is having too big of a product range creates value? In the case of Netflix, ads help because they create extra revenue on the lower range price-point.
Netflix’s new ad-supported plan was the least popular tier of its service in November, the first month in which the streaming giant offered it. The plan accounted for 9% of new Netflix sign-ups in the U.S. during the month. Some 57% of subscribers to the ad-supported tier in the first month were people rejoining the service or signing up for the first time, while 43% downgraded from pricier plans. Or, alternatively, maybe customers just can’t be bothered to downgrade — until the next price hike, that is. That is when having those ad-supported tiers will make a big difference (and it will help with the password-sharing crackdown as well).
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