Welcome to The Newsletter Operator!

In today’s email:

• How to make the “MorningBrew for X” business model work (and how to make it better)

• How Dickie Bush and Nathan Baugh grew their followers and newsletters

• The best media kit I’ve ever seen

• And much more…

Deep Dive

How to Make The "MorningBrew for X" Model Work

If you’re reading this you’ve probably taken inspiration from media companies like MorningBrew, The Hustle, and The Skimm.

They have a simple and elegant business model:

• Write: Write and send an email every day

• Grow: Get people to subscribe and read

• Sell: A sponsorship in each email

Dozens of media startups have had success following this model…

• The Milk Road build a daily crypto newsletter to 250k subscribers and sold for 7 figures in 10 months

• TLDR Newsletter grew to 1M+ subscribers and ~5M+ in annual revenue in 2 years

• The Daily Upside grew to 850k subscribers in 3 years

• 1440 Media grew to 2.3M+ subscribers in 5 years

That said, the model is simple, but not easy. For every success, there are many more failures.

However, I believe that we’ll see many more newsletter-first media companies succeed and the MorningBrew model is just getting started.

Here’s why:

It’s easier than ever to start a newsletter

Tools like Beehiiv and Substack make it much easier to start and grow newsletters.

Beehiiv’s features almost completely replace the 3 person engineering team we had at The Hustle. (Where I previously worked).

To scale a newsletter business, you need advanced analytics, segmentation, referrals, recommendations, and more.

Beehiiv has those features out of the box for $99 a month. This didn’t exist 1 year ago.

Substack lacks those advanced growth and analytics features. But it's incredibly easy to use and always free.

Quick side note: I highly recommend Beehiiv if you want to start a newsletter or change ESPs. Sign up with my referral link here if you want to support my newsletter.

Easier to monetize

Newsletter ads are still a developing growth channel for marketers. Like influencer marketing in 2017 or podcast ads in 2012.

And although macroeconomic conditions have caused an advertising slowdown, more advertisers are utilizing newsletter ads as a growth channel.

If marketers continue to see success, more will follow.

Plus, marketplaces, agencies, ad networks, and affiliate networks like SwapStack, Paved, MadRev, Sparkloop Partner Network, and more will sell ads for you. Saving newsletter operators a ton of time.

Behavior is changing

Most people still expect marketing emails when they sign up for a newsletter. But as more awesome editorial newsletters grow that will change.

Readers are seeing the value of newsletters for news and education.

Content creators and influencers are catching on

Content creators now see newsletters as a way to own their audience and build independent media businesses that are separate from their personal brand.

It's still early but sharp creators are catching on:

• Tim Ferriss' newsletter has 2M+ subscribers

• James Clear's newsletter has 2M+ subscribers

• Matthew Berry built Fantasy Life to 300k+ subscribers

• Codie Sanchez grew her newsletter to 300k+ subscribers

• Sahil Bloom has grown his newsletter to 250k+ subscribers

• Colin and Samir created The Publish Press in 2021. It now has 30k+ subscribers

There are dozens more that don't share subscriber numbers or are not on my radar.

I expect more creators follow to the MorningBrew model and create newsletters with independent brands like Matthew, Colin, and Samir have.

The next step to scale a content creator business is to grow into a media company, and the MorningBrew model can be a great way to do that.

How the MorningBrew Model works, how you can STILL make it work in 2023, and how to avoid common pitfalls:

Now let's dive into how the business model works...

The Economics

The primary way MorningBrew model newsletters make money is with sponsorships.

Newsletter sponsorships are typically priced on CPM (cost per 1000 impressions). Newsletters count unique opens as impressions.

For example, let’s say a newsletter has:

10,000 subscribers and a 50% unique open rate That newsletter will get 5,000 opens aka 5,000 impressions.

The CPM advertisers will pay for a newsletter ad varies from $30 to $300. But the industry standard for most B2C newsletters is $50.

How to calculate LTV

Use this tool from Beehiiv. It’s the best formula I’ve found.

In my experience, B2C newsletters that sell ads at ~$50 CPM and have a ~45%-55% open rate end up with a subscriber LTV of $6-$12

That’s a low LTV compared to other business models, but CAC is much lower too.

Newsletters that do paid acquisition well can acquire subscribers for <$2.00. And if organic growth is going well too, blended CAC can be <$1.00

That’s a pretty good CAC to LTV ratio.

Payback period

Where newsletters fall behind is with their payback period.

Newsletter subscribers can open emails and be monetized for years but at a $50 CPM newsletters make just $0.05 per open.

At 20 sends per month and a 50% open rate, they make about $0.50 per subscriber, per month.

So at a $2.00 CAC, your payback period is 4 months.

Not great compared to many DTC e-commerce businesses that can break even on the first product purchase.

However, there are ways to overcome this we’ll cover later…

Content strategy

Gone are the days of building a newsletter about tech, business, sports, or politics. The media market is saturated. Niche with newsletters with unique perspectives are winning.

• 1440 - Unbiased news - 2M+ subscribers

• Milk Road - Funny crypto news - 250k+ subscribers

• The Peak - Canada business news - 100k+ subscribers

• TLDR - News for software engineers - 1M+ subscribers

• Fantasy Life - Fantasy football and betting news - 300k+ subscribers

I recommend going more niche than these examples. Check out this guide for more tips on content strategy and positioning.

Growth

Newsletters get subscribers from 3 primary channels:

1. Paid growth

2. Email platform growth

3. Social audience growth

Paid growth means social ads, ads in other newsletters, affiliate marketing, etc. Newsletters like MorningBrew, TLDR, 1440, The Milk Road, and The Hustle acquire most subscribers from paid acquisition.

Email platform growth means cross-promotions, recommendations, and forwards. This is usually the smallest growth channel of the three.

Social growth means building a social following on Twitter, Instagram, Linkedin, TikTok, YouTube, etc, and converting those followers and views into subscribers.

Monetization

I believe newsletters that go beyond the sponsorship model will have the best outcomes in the long run.

Sponsorships are great in many ways:

• No need to spend time and money building your own products

• Zero or very little cost to sell (other than your operation, marketing, and sales commission cost)

However they are:

• Not recurring

• Heavily affected by macroeconomics

• Hard to get advertiser results and repeat purchases

Magic happens when you combine a large newsletter that is monetized with sponsors AND the ability to create and sell its own product(s).

Newsletters can be a massive distribution channel. You can use that distribution to sell owned products with placements in editorial newsletters and with email marketing sequences and automation.

However, not many newsletter businesses are doing this at scale yet.

Why? Because it’s hard to be great at 2 or more business models. But those that pull this off can have amazing results.

How Owned Products Help Newsletters Scale

Earlier we talked about LTV, CAC to LTV ratio, and payback periods.

Newsletters often can have great CAC to LTV ratios but long payback periods.

Selling your products can fix this by increasing LTV and reducing your payback period.

Here’s an example of how this works:

• If you acquire a subscriber for $2

• Then sell a $100 product on your thank you page + with a 7-day email welcome sequence

• And 2% of subscribers buy the product within 7 days

You now can break even on ad spend in one week rather than breaking even in 4 months with sponsorship revenue.

Plus, there are now more options to help shorten your payback period by making money right after users join your newsletter.

Here's how:

Sparkloop Upscribe

A new tool that lets you recommend other newsletters when people sign up for yours. For each subscriber, you send to other newsletters you can earn $2-$4, and you can recommend 3-5 at a time.

This backs out to around $2-$5 in revenue every time a user joins your newsletter.

This is called co-registration. Other companies offer this too but Sparkloop is my favorite.

Lead generation

After you join some B2B newsletters you'll see a questionnaire to complete. They'll ask questions like:

• Location

• Company size

• Job function/title

• Job level/seniority

If you answer the questions in a specific way they'll sell your email as a "lead" to advertisers. They're often able to sell each lead for $50-$150

Tripwire funnels

A tripwire is a marketing method used to convert subscribers into buyers with an irresistible or limited offer.

Often this is done on the thank you page with a heavily discounted product. Or a “one-time offer” that is only available to new subscribers.

The aim is to get customers to impulse buy a low-priced product. Most tripwire product offers ranges from $5-$99. The product should be priced low enough that subscribers don’t need to “think” before buying.

The key here is to drive impulse buys with scarcity and urgency.

For more on marketing funnels, read “Dotcom Secrets”. It’s the definitive book on marketing funnels.

One more thing ledgen and tripwires:

I would be very careful about using lead gen and tripwires. There’s a right way and wrong way to use these strategies. Be ethical and truthful. The amazing thing about a newsletter is the trust and relationship you can build with your audience. More money in the short term is not worth damaging that.

Create a "value ladder" with your products and services

Newsletter businesses should consider creating a product "value ladder" that their audience can climb.

On each step of the value ladder is one of your offers — and those offers increase in value and cost as someone goes up from left to right.

Here’s what that could look like:

• Free newsletter ↓

• Job board ↓

• Paid newsletter ↓

• Paid community ↓ 

• Online course ↓

• Coaching program ↓

• Event ↓

• Mastermind ↓

• Agency ↓

• Investment fund

I wouldn't recommend offering all of these products/services. That's overkill.

However, 2-4 offers that increase in price and value can help you better serve and monetize your audience.

The Best Links

📈 Growth

Deep dive on how newsletters grow (link)

How Dickie Bush went from 0 to 326k Twitter followers in 30 months (link)

How Nathan Baugh grew his newsletter to 57,328 readers in 11 months (link)

How to make newsletter cross promotions more interesting than the standard shoutout (link)

💰 Monetization

The Milk Road partnership deck is a great example of how to make a media kit that sells advertisers (link)

📰 Newsletter News

Is the Morning Brew model crumbling? (link)

How ConvertKit’s Creator Network will change audience growth and monetization (link)

📚What I’m Reading

A Media Operator is must-read newsletter for insights and analysis on the business of content, newsletters, and media (link)