Before we start: we recently sold a subscription to one of the world’s best business schools (see here). If you’re reading this and have contacts at business schools that could benefit from a Realistic Optimist subscription, please email me at [email protected]
I’d be eternally grateful for intros.
Hello,
When I started raising the RO’s seed round about a year ago, I went around town (Paris) to meet various media founders. I sought to understand which media business models worked and which ones I felt excited to build. The latter variable was crucial: attaining excellence is correlated with one’s love for their craft.
As my benchmarking progressed, the two main business model decisions I had to make became clear.
Choice #1: Diversified or not?
The media founders I met either had a maniacal focus on a single revenue stream (often paid subscriptions) or a “diversified” business model (subscriptions + events + ads + consulting…). The first category of founders was infinitely more convincing.
“Diversified” media companies felt like they either lacked strategic clarity or were “diversifying” because their original revenue stream wasn’t working. Many of those “diversifications” seemed defensive and often worsened the original problem. If you diversify because your original plan doesn’t work, you spend less time and energy on your original plan, slimming its chances of success further.
On the contrary, the “maniacal focus” founders chose the paid subscription path, stuck to it come hell or high water, and eventually made it through. There’s some survivor’s bias involved as the founders I met were, by definition, still around. There’s certainly a cemetery of failed companies in this category.
However, the media founders running a 100% paid subscription publication seemed more in control. Their companies looked more resilient, their revenue was recurring, and their mandate was crystal-clear: write articles that people were willing to pay for.
For the RO, my preference was unequivocal: we would be a 100% paid subscription-based publication. I’m not interested in adding another revenue stream until we’ve converted every single paid subscriber we can serve.
My thinking on this hasn’t changed one bit in the past twelve months.
Choice #2: B2B or B2C?
The next choice was deciding whether we’d be selling subscriptions to individuals or companies. On this, my thinking has clarified only recently. This has cost us time. My bad.
The RO had two types of paid subscribers: VCs with emerging market exposure and MBA programs. The RO is, objectively, a professional resource.
I can’t tell you why, but this rubbed me the wrong way. I had this vision of the RO being read by millions at cafés, each diligently paying their monthly subscription just as one does to the New York Times. For that reason, I was steadfast in launching a €9/month subscription plan in January.
As I reflected on our Q1 performance, I realized this has been a mistake. Something cheaply priced must be made up for in volume of sales. For something to be sold voluminously, it must have mass appeal. This works for toothpaste, Toyota Prius’, and in the media context, a general news publication like The New York Times.
It doesn’t work for the RO. One of our upcoming articles is a ~6,000 word deep-dive into the Iraqi fintech sector, with a focus on the Iraqi central bank’s regulatory posture. It’s a banger article, and it’s exactly the type of stuff the RO exists to publish. But let’s be honest: it’s niche. It can’t be priced the same as a burger + fries + soft drink combo.
In Q1, I also started to understand what scaling a €9/month subscription implied. The price is too low to justify direct sales (ie: sales calls), so you try other things. Introductory offers. Free versions. “Engaging” LinkedIn posts. A/B testing the design of your “buy a paid subscription” button. “Short” and “audio” versions because “people want to cut through the noise”.
These things serve a purpose. But they are too algorithmic, frustrating, unpredictable to constitute our main growth strategy. Plus, it relies on website traffic, which is apparently plummeting for media publications.
I want to speak to human beings and hear them tell me why they want or don’t want our product. It’s also more fun, real, tangible than trying to game the LinkedIn algo and fighting ChatGPT flight.
Impact on our growth strategy
That’s why we’ve removed the monthly subscription option.
Our new B2B, annual-only, subscription business model means we can focus on a simple growth strategy: direct sales.
I’ve always found the direct sales model elegant and reassuring. You reach out to people you think would gain value from your product, have a conversation with them, and ask them if they want to buy it. You get either a yes or a no. The yes’ mean revenue, the no’s yield useful insights. Rinse and repeat.
Compare this with a model contingent on people buying €9/month subscriptions on your website.
You have to make LinkedIn posts that drive people to your site. Sometimes, those LinkedIn posts flop and you don’t know why. Some people visit your website. You don’t really know who they are or what they want. Then, miraculously, someone buys a subscription. You try to understand why. Oh too late, they cancelled their subscription because they only wanted to read one article.
The direct sales model is much more straight-forward: actually speak to someone, get a yes or a no, move on. I want a business model that justifies this model, and a B2B, annual-only subscription-based model does.
What excites me about the RO is the writing we produce and the product we’re crafting. That’s where I want us to innovate.
I don’t want to spend time innovating on the business model. On that, I’d like us to be as basic as possible: make an excellent product and get people/companies to buy it.
Eat your TOFU
As we’re cementing this direct sales strategy, I’ve completely changed my view on so-called “top-of-funnel” (TOFU) initiatives.
Take RO Webinars. We did a couple at the end of last year. They felt like a failure because they didn’t “convert”. No one who attended the webinar actually bought a subscription! What a waste of time! Wrong.
Now that we’re not really expecting “self-serve” conversions, our goal is to get people to hear about the RO, gain value from the RO, for them to be “warm” when we approach them via an outbound message. We’re not a productivity SaaS tool: we sell information. The trust factor is thus extremely important (rightly so!) in a RO subscriber’s buying decision. Ideally, we want that trust to be built prior to us hopping on a sales call.
Through our RO Ambassadors program (we announced our first Ambassador last week), we’ll be scaling up these “TOFU” initiatives, mostly through events (physical and virtual). We want people to hear about the RO, interact with the RO, gain value from the RO before we sell them anything.
This is something I was too immature to understand. I’m finally realizing the importance of pre-sales, trust-building initiatives. We’ll double-down on those.
Other RO updates
Redesigned the website (not totally done yet). For the first time, the website has elements of actual custom code. This was done by Paul, our developer, and opens up a true “product” culture at the RO.
For example, Paul is working on building custom SSO access for a business school in India we’re starting a free trial with.
We’ve got a rich, growing library of quality, unique writing. Now, we’re working on a product to present that library in the best light.
Onboarded new paid subscribers from Yango Ventures, VKAV, AVP Ventures… Our roster of paid subscribers is starting to look quite impressive (see our new website for the list).
Continuing our conversations with top business schools. This is taking longer than expected, as I try to understand who is the best person to “approach” when doing cold outbound. We’ll get better at it.
It’s been a slow month, at least from a revenue perspective. We’ve been laying a lot of foundational groundwork (launching the RO Ambassador program, continuing to ruthlessly edit our future RO Long Reads, getting to work on the RO product…).
Aakash and I agree this is somewhat frustrating, but we both understand the big wins we’re setting the foundations for. Pivoting to a “B2B publication mindset” required a few adjustments, with impact on revenue a few months down the line. Patience is a virtue.
Talk to you next month and once again, if you know anyone at business schools (professors, students, admin), do feel free to intro me.
Tim