🐂 Still Bullish on Newsletter Businesses
In response to Scott Oldford's recent post, I set out why I'm still bullish on newsletters as the business
Hey there 👋,
This week I set out why I’m still bullish on newsletter businesses, in response to Scott Oldford’s post yesterday:
The difference between newsletters and newsletter businesses
Why newsletter businesses will become the #1 digital media asset
Why existing businesses should launch independent media assets
Why The Newsletter is The Business
Scott set out in his post that he still believes in newsletters as a way to fuel your business, but:
What I’m not bullish on is a newsletter as the sole business… If your newsletter is the business… you’re going to have a bad day.
In his post, Scott shares Matt McGarry’s newsletter predictions for 2024 and says he agrees with them all:
So do I, but I feel that we need to make a clear distinction between ‘newsletters’ and ‘newsletter businesses’.
A newsletter is what almost every online business had pre-Substack launching in 2017. It was a way to collate your top blog posts and broadcast offers to your list, in order to drive traffic back to your site.
A newsletter business is a destination you drive traffic to and is monetized as an independent asset.
Substack started by focussing on paid newsletters, but operators also ran sponsorships on free newsletters alongside. This was how I was able to create $5K/m+ of revenue within a few months and got acquired at month 7 for six figures back in 2020.
But it was beehiiv launching in 2021 that built the platform for newsletter businesses and truly created this space.
Earlier this year I sold two newsletters on beehiiv to Scott Oldford that together had been making me ~$4K/m over the last few months at the time of acquisition. That combined with the income from my investing newsletter was cashflowing me a full-time income as a newsletter operator.
But Scott, with his Wisdom Media rollup with ~ 20 newsletters, was playing a much bigger game and was scaling an operations team.
It’s no secret that sponsorship has got a lot tougher over the last 6 months, and so it makes total sense that Scott would use the newsletters instead to power his brands such as with Acquire The Web now attached to the #1 newsletter marketplace Duuce.
Indeed, he states that he is going back to his original model:
Our model originally with newsletters was to create lead flow for the companies that we owned inside of our portfolio… We realized that the cost of running a media company at scale simply did not make sense and majority of the costs were actually from attempting to make it a direct-profit driver instead of a value-driver for the dozens of businesses we own and eventually hundreds of businesses we will own.
Scott does list a number of scenarios where having a newsletter business does make sense and I guess I fit the first category:
You are a sole operator and you want to take care of most everything alongside of a VA and you’re looking for a business that can generate 6-figures/year.
But then there are the Manu’s from Stacked Marketer of the world who has brought in 7 figures in revenue with his team and made his own 2024 predictions in this thread:
We run 3 newsletters and a premium membership, and my business has made over $2M in revenue so far.
And here are my newsletter predictions for 2024:
(Warning: Some of these will be controversial.)
Over the past 3 months, I’ve had regular conversations with people about… twitter.com/i/web/status/1…
— Emanuel Cinca (@emanuelcinca)
Nov 7, 2023
Why newsletter businesses will flip websites
The cost of starting a newsletter is $0, with platforms like beehiiv that make it simple to launch, monetize and scale.
And by building and nurturing a newsletter audience that engages with your content, and trusts your picks and expertise, you're able to unlock sponsorship revenue at far higher CPMs (cost per 1000 opens to advertisers) than you can make with websites.
Website advertising platforms such as Ezoic can generate a strong $10-$20 earnings per thousand views, but newsletters typically command a $50 CPM in the business niche, with investing being higher, and AI a bit lower.
So with a 50K email list, and a 50% open rate, an email send with just one ad unit (you should have multiple) will earn you $2,500.
And you can also monetize in so many other ways:
As you own your list, the newsletter business model is much more defensible than building niche sites that are dependent on SEO traffic.
I feel that newsletter businesses are where websites were back in 2011, i.e. multiples low and few people know how to value them.
But over time they will become far more highly valued than content sites dependent on SEO, and that the number of newsletter businesses will start to compete with the number of websites we see on existing digital asset marketplaces such as Flippa and Empire Flippers.
Why existing businesses should launch independent media assets
Back in September I posted about how it makes sense for anyone with an existing 10K+ list to launch an independent media asset:
🧮 Newsletter business math (aka why you should launch your own media asset on @beehiiv )
You're a marketplace, SaaS, or ecommerce store spending five figures a month on paid acquisition...
— patey.sol (@RichardPatey)
Sep 11, 2023
But after having a call with a Letter Operators lead, the math becomes an absolute no-brainer when you have a 50K+ list.
If we assume a 50% open rate (what you should be at least aiming for in these apple mail auto open times) then you have 25K people opening each send.
If your audience is capable and valued, getting a $50 CPM for sponsorship is reasonable (even though it's got a lot tougher recently with CPMs squeezed).
That means that if you only have one ad unit (you should have multiple) you'll be making $1,250 per weekly send or $5K/m.
Add on affiliate revenue, and revenue from promoting other people's newsletters using beehiiv boosts, and very quickly you have a six figure revenue business.
But the best part for me is that there is an audience valuation floor set by the CPA that you or your counterparts are bidding to acquire subscribers.
If you can buy a subscriber for $2 and 50% churn so it costs you $3 to get an open (at 50% OR) then you immediately have an asset value of $75K before making any money.
Combine that with a multiple of the revenue and within 12 months it's not unreasonable to think you'll be at $250K-$500K in asset value.
Keep growing by funnelling website traffic and diverting some of your marketing budget to paid acquisition for the media asset (as it can promote your business for free as a 'sponsor') and you could get to a 7 figure exit within a few years:
Industry Dive was acquired for $525M in 10 years.
MorningBrew was acquired for $75M in 5 years.
The Hustle was acquired for ~$27M in 4 years.
Milk Road was acquired for 7 figures in 10 months.
The Peak was acquired for $5M in 3 years.
Keep building your email list.
— Matt McGarry (@JMatthewMcGarry)
Jun 9, 2023
And with the new $1,999/m package at Letter Operators, we can run it for you.
Disclaimer: Not financial or business advice. This newsletter is strictly for information and education purposes. There are affiliate links to beehiiv in this issue.