What’s the difference between a thriving subscription business and one that’s flailing?
In one word: unsubscribes.
TLDR
Based on the subscription-value calculator we built recently , when you compare a newsletter with a 1.5% churn versus a 12% churn, the lifetime value of a subscriber for the average Substack publisher is a whopping $467 vs $58.
That’s the math. More subjectively, over time, unsubscribing readers (aka churn) are the undertow that becomes, when it becomes too big, a riptide that sucks a creator’s business under.
Below, we explore the formulas and mechanics that determine a newsletter’s long-term viability. We’ll describe why quizzes are a cost-effective strategy for countering churn. And we’ll link to the new churn calculator so you can experiment with the math in this email using your newsletter’s own specifics.
Net gain
We’ll start with some hypothetical newsletter math. Let’s say you’ve got 1,000 subscribers and are gaining 20 subscribers a month.
That sounds great. All else being equal, five years from now your revenues will rise from $84,000/year to $192,000. Nice job!
Or, as our president would say, NICE JOB!
Beneath the hood
It’s easy to focus on net subscribers gained per month, particularly in the early months of publishing when lots of new people are showing up.
The reality, though, is that subscribers come and go.
Sure, it’s possible your original 1000 subscribers are loyal AF and will never unsubscribe. But a (much) more likely scenario than what’s above is that you’re gaining 50 subscribers /month, while also losing 3% of current subscribers each month!
Initially, that means you lose 30 subscribers/month (hence the 20 subscription net gain). But as your subscribers slowly grow, the losses mount. MBAs call this “churn.” When you factor in 3% churn month after month to our original scenario, your newsletter’s year 5 revenues will be $106,481.
The bad news
Now let’s say your new subscription uptake stays steady at 50/month, but after an initial exciting gusher on launch, monthly churn rises to 6%. (Objective data is scarce, but 6% churn sits in the middle of what Claude cites as the range for B2C newsletter churn.)
Maybe many subscribers joined because of a single press hit, but aren’t interested in your core product. Or you’re publishing too much and getting ignored. Or you’ve got new competition for eyeballs and attentional minutes.
In year 5, your revenues are just $70,523. You’re still gaining 50 new subscribers/month, but you’re losing more. Over time, churn is the undertow that will become, if it gets too big, a riptide that sucks your business under.
The good news
But wait! What if you can cut churn to 2%/month, while still winning new 50 subscribers a month thanks to organic sharing and occasional press hits?
Maybe churn drops because you’re regularly publishing exactly what your readers need — your voice is scintillating, your sources are unique, your commentariat is vibing, you’ve added a new subscriber-only chat, you’re giving subscriber-only discounts on trendy branded swag, you’ve picked fights with the right idiots. And, yes, you’re publishing weekly quizzes that keep 10% of your readers amused, educated, sharing and/or addicted.
With 2%/month churn, year 5 revenues will be $167,143… 57% more revenue than if churn is 3%… and 2.4 times more than if churn is 6%.
The value of a subscriber: $467 or $58?
Let’s come at churn atomically, diving down to the level of a single typical individual subscriber.
It’s easy to think of each new subscriber as a $7 win. In fact, a new $7/month subscription might be worth as much as $467, thanks to 1.5% churn and an average lifetime of 5.5 years as a subscriber.
Or that subscriber could be worth just $58, if monthly churn is 12% and the average subscriber sticks around just eight months.
(Reduce churn to 0.5%/month and the average subscriber sticks around 17 years and pays you $1,400… A REALLY NICE JOB!)
Turning content into connections
What’s all this mean for your strategy as a publisher?
Of course it’s tempting to create more content… more exclusive interviews. More hot takes.
And obviously, letting your readers network with each other through comments can make a big difference. Podcasts help deepen the brand connection. Subscriber-only chats are important too.
But all those strategies require ongoing work, and just 1-10% of subscribers will be consistently moved by a particular strategy.
Investing in quizzes
Quizzes are an essential addition to this bundle, because after an author’s initial investment in creating a quiz, subscribers do all the work… happily! (The New York Times didn’t hire 100 game developers just for giggles—they understand that engagement tools like quizzes are churn-killers.)
A quiz provides a uniquely cost-effective opportunity to recycle the work you’ve done during the week, the content you’ve created, the editorial choices you’ve made, the telling details and odd phrases you’ve spotted. It’s an opportunity for a reader to compare herself to peers in each question’s answer-skew and in each post-quiz results histogram.
The quiz broadens your relationship with readers — and their relationships with each other — across multiple psychological levers: ego (pursuing a perfect score), amusement (making good guesses), and loss aversion (maintaining a streak). 100% velcro for your newsletter!
A quiz gives readers a chance to enjoy, to compete and most importantly, invest more time and energy in your brand. If 100 quiz takers each spend an average of 3 minutes on a single quiz, that’s five hours of reader benefit generated by something that took you 20 minutes to create. And that’s five hours readers have not invested in their relationships with NYTimes.com or CNN or Vox or Heather Cox Richardson.
Back to the bucks
That’s all subjective.
To return to the almighty dollar, the original premise of this email, every $7/month subscriber that a newsletter wins or keeps has a potential $467 payoff if properly nurtured. And every lost subscription is at least $467 that just walked away.
If a quiz taken by 100 readers helps just 10 subscribers stick around six months longer, that’s $420 of value. If 10% of 1,000 quiz takers become more invested in your brand, that’s $4,200. For 20 minutes of work on a quiz that deepens engagement for highly motivated subscribers, that’s an unbeatable ROI and an unrivaled investment in your newsletter’s long term viability.
Here’s the new calculator that illustrates churn’s impact on your long-term revenues. Just change churn or other variables and hit enter. BTW, if you’d like us to analyze your newsletter’s churn using raw data, drop us a line.