Online services are usually provided over the Internet and telecommunications infrastructure. The online services focused on in this paper include Microsoft Office 365 (Word, PowerPoint, Excel, Access) and Internet service provider (ISP) triple play services (broadband access, VoIP, and Internet Protocol television (IPTV)).

Such online services are usually sold as a bundle to increase company profit. There are several reasons for the profitability of the bundle strategy. First, because online services usually share the same network or storage infrastructure, the additional cost of the bundling sale is marginal. Second, customers who have a different reservation price for each separate sale can agree on the price of the bundle if the total sum of the separate service prices in the bundle is less than or equal to the bundle price. However, is a bundling sale always more profitable than separate sales? This paper proposes a framework that determines the profitability of a bundling sale when various parameters are considered.

This paper builds a general profitability model for the separate sale and the bundle sale that consists of the number of customers, the service cost, the customer reservation price, and the sale price. To capture a steady state of the model, a market equilibrium is defined as the number of customers necessary to incur a positive profit. The model is modified to study the impact of various parameters, for example, the network effect, the distribution of customer reservation price, and the service cost.

Through exploring the parameters, the paper observes several interesting relationships. First, the bundling sale is more beneficial if the network effect is positively stronger. However, if one of the reservation prices in the bundle set is much more expensive than another, the bundling sale attracts fewer customers and is less beneficial. Second, if separate services have a different network effect, the bundling sale may not be beneficial because there can be no optimum equilibrium. Third, if the reservation price follows a Gaussian distribution, a large variance reduces the positive impact of the network effect, which reduces profit. Finally, if the reservation prices in the bundling sale are correlated, a negative correlation is more beneficial because it results in reducing the total variance.

This paper is limited by assuming a single complementarity of the bundled products and a few reservation price distributions (uniform and Gaussian). However, the framework is thoroughly designed and the analysis is reasonable. It will be helpful for online service providers to gain valuable insights into their pricing schemes.