Newsletters 3.0 - Why “newsletter ad-only” businesses are dead and how to adapt
If you’re running a “newsletter business” the way most people do, you’re doomed to fail.
Matt McGarry
May 03, 2025
DEEP DIVE
If you’re running a “newsletter business” the way most people do, you’re doomed to fail.
Let me explain…
When people think of a newsletter business or newsletter-first media company they think about a free daily newsletter that generates revenue from ads inside email.
This is the model companies like Morning Brew, TheSkimm, and The Hustle used historically.
That model is dead.
Newsletters are changing fast. If you don’t adapt, you'll be left behind.
To explain why and what to do now, I’ll break down the history of newsletters and why founders and publishers must pivot to what I call newsletters 3.0.
Newsletters have been around for a long time. Before the internet, publishers sent free and paid newsletters by mail.
The first company to scale an online email newsletter was DailyCandy, founded in 2000 by Dany Levy.
DailyCandy quickly grew from 700 friends and contacts, to a subscriber base of 285,000 by 2003 and over 2.5M by 2008.
In 2008, Comcast acquired DailyCandy for $125 million.
DailyCandy and other pioneers of email-first content inspired the next wave…
TheSkimm was founded in 2012 by Carly Zakin and Danielle Weisberg. At its peak, their email audience was over 12M women.
Their success sparked fast followers who built bigger businesses using a similar model.
The Hustle was founded in 2015, grew to 2.5M+ subscribers, and was acquired by HubSpot for $27M+ in early 2021.
Morning Brew also started in 2015. They built an email audience of 4M+ subscribers and were acquired by Axel Springer for $75M in 2020.
1440 Media was founded in 2017 and now has 4.5M+ subscribers and $20M+ in profitable annual revenue.
Others built big businesses from email newsletters, including: The Newsette, TLDR, 6AM City, Fantasy Life, Charlotte Agenda, and many more.
Newsletters 2.5 is an extension of 2.0.
These companies followed the same model but focused on serving niche audiences.
The Peak (Morning Brew for Canada) started in 2020 and was acquired in 2023.
Milk Road (The Hustle for crypto) started in 2022 grew to 250k+ subscribers and was acquired in the same year.
Superhuman, The Rundown, The Neuron and many other “AI newsletters” started in 2023 and quickly grew to 500k-1M+ subscribers by summarizing news in the trending AI space.
These companies did 3 things well:
Content
Created fun, fast, and easy to read daily newsletters (<5 minute read)
Made the reader feel smarter and more informed
Focused on summarization and curation
Growth
Acquired engaged email subscribers at low cost ($0.25-$2.00) from sources like: Facebook ads, referral programs, co-reg, audience sharing, and more.
Monetization
Drove most revenue with newsletter advertising/sponsorships.
Typically newsletter ads consist of short 50-100 word “primary ads” in email
Usually, 1-2 ads per newsletter and 5 sends per week = 20-40 ads per month
From 2015 to 2022 this model worked like gangbusters.
These companies could:
Acquire subscribers with paid ads for $0.50 to $1.50 (at scale)
Achieve 45%+ open rates with a small, low cost writing team (Note: This is before Apple mail privacy protection where 45% open rate is equivalent to ~60%+ open rate today)
Sell newsletter advertising at a $50 CPM or more. (CPM = cost per 1000 opens)
Stand out in the inbox. There was less competition. Very few people were sending editorial newsletters with valuable content inside an email.
The unit economics were fantastic:
Blended subscriber acquisition cost: ~$1 or less
Revenue per open (from advertising): ~$0.05 or more
Open rate: 45%-50%+
Revenue per subscriber per month: $0.50 or more
Payback period from acquisition: 2-3 months
ROAS: 300%-500%
But things started to change in 2022-2023…
Here’s what happened.
1) More competition
Substack, beehiiv, and Kit made it easy to start a newsletter.
The competition for readers and advertisers skyrocketed.
2) Acquisition costs went up
Apple introduced app tracking transparency in 2020 and cost to acquire subscribers or customers soared.
Costs improved in 2022, but they'll never be as low as in 2015-2019.
3) Ad rates went down
The macro-environment changed in 2022-23.
Interest rates went up
Crypto and stocks went down
VCs funded fewer companies
All this and more led to a collapse of advertising budgets.
Publishers of all types were hit hard. Newsletter CPMs (on average) went from $50-$75 to $20-$30 for many publishers, and less ad inventory was sold.
4) Inbox tracking changed
Apple introduced mail privacy protection (MPP) in 2021.
This made open rate tracking unreliable.
Open rate was the main metric newsletters used to price and measure advertising. Now it’s gone. The full effects of this change didn't kick in until 2022 and after.
5) AI
AI solved summarization — one of the core value propositions of many newsletters.
Now, are most people choosing to read AI content over newsletters? Not often, yet.
But it's a threat. Publishers focusing on summarization and repurposing now live in a world where 80% of their jobs can be done with AI.
Of course, there's still value in how they curate what to repurpose, their voice, writing style, POV, etc. But overall, the content is less valuable.
These changes devastated the business model.
You can’t make a newsletter work if:
You sell ads at less than $40-$50 CPM (and that's your only revenue channel)
Your blended cost to acquire subscribers is more than $2-$3
Your unique open rate (with MPP) is less than 45%
There are dozens of other newsletters with similar or better content competing for your ideal reader’s attention.
This is why most so-called “newsletter businesses” are struggling.
They’re “newsletter ad-only businesses” with one declining revenue channel (newsletter ads) and one distribution channel (email) with more competition than ever.
But, there’s hope…
The next wave of media and education: Newsletters 3.0
After reading this, you might have the impression that I believe, “newsletters” or “email” is dead. That couldn't be further from the truth.
Email is still the best way to sell things.
Email is the best direct audience relationship channel.
Newsletters are the best way to build readership and trust in the inbox.
Yet, the way most “newsletter ad-only” businesses sell and build trust in the inbox is completely backward.
There are 2 big problems:
1) Newsletter ads are one of worst ways to “sell” things
They can sell. But not as well as dedicated emails, custom content, webinars, lead gen, and other marketing methods.
Or a full funnel marketing campaign that combines all of this and more.
There's only one way to make money from your audience: Sell products/services.
That could be your product/service
Or another companies product/service (your sponsors)
If the only way your business makes money (newsletter ads) is not an effective way of fulfilling the primary goal your customer has (sell their product) is that a good business model?
Hell no.
This doesn't mean newsletter ads never work. They do.
This also doesn't mean you should stop offering them completely.
It simply means they shouldn't be your only (or primary) revenue channel.
2) Daily newsletters with summarized and re-purposed content don’t build trust
Most of these types of newsletters all look the same. This content style was novel in 2012-2019 but is commonplace now.
Of course, there are publishers who do it well. But most don’t.
Instead, a 1-3x per week newsletter with unique, insightful, and original content would serve most publishers and audiences better.
This weekly newsletter could be paired with another channel that builds trust and engagement when stacked with email, like: Podcast, YouTube, or community.
Here’s what needs to change
Summarization and repurposing won’t cut it
You need original insights, indispensable content, and world-class human curation.
If that means publishing less newsletters, that’s okay.
Newsletter advertising should not be your primary revenue model
A media business should be able to successfully create and sell your product/service (direct revenue) and another company's product/service (sponsorship).
You need both to win.
Go beyond email and master at least 2 of the 5 “owned audience” channels
There are 5 channels with direct audience relationships:
Email
SMS
Podcast
Community
Print
Trying to build an audience with all these channels at once is a bad idea. Having only one in the long run is also a bad idea.
If you can master 2 and build a targeted, engaged audience of 100k+ people with these direct channels, you'll have an insane advantage.
Become a marketing partner, not an ad-supported publisher
Offer marketing services like:
Webinars
Sponsored social content
Custom content and advertorials
Lead generation (you create a lead magnet and promote it for the brand)
Dedicated marketing emails (only a handful per month to segments of your list)
And more (be creative!)
Marketing services allow you to sell bigger packages at higher CPMs that sell more for your sponsors. When you do that, sponsors pay more, renew more, and work with you longer.
One scalable paid and organic audience growth channel.
Master paid and organic growth.
It takes two to tango. Yet, spreading yourself too thin and trying to grow on all the platforms will set you up for failure.
Find one paid channel, one organic channel, and focus.
10X LTV don’t 1/10th CAC
Spend more time increasing the lifetime value of your audience, subscribers, and customers than you do working to decrease your subscriber acquisition cost.
Whoever can spend most to acquire a customer (or subscriber) wins.
Acquisition cost is always going to go up over time. The only way to build a sustainable business is to make more money per subscriber, customer, or client.
There are two ways newsletters can audience 10X LTV:
Become a marketing partner, not an ad-supported publisher
Build and sell a flagship product
Flagship product
Through your conversations with readers, sponsor results, and email replies, you should identify patterns in your audience's problems.
Use this to create a product or service that:
Solves a real problem
Is aligned with the category and niche you aim to own
You'll never unlock your audience's true revenue potential without a flagship product.
And yes, it’s difficult. Identifying and selling your flagship product successfully may take 6-12 months, but it's well worth it.
My advice is to keep it simple:
Focus on media products that are simple to create and fulfill (not SaaS or services)
Media products = Digital product, event, course, live learning, coaching, mastermind or peer group, subscriptions, memberships, or a hybrid of these.
Build a media asset, not just a newsletter
If you do all these things and build a team of people (with help from AI and automations) that can run the operations — you will have a media asset that could be acquired and/or provide cashflow without you.
That’s the goal.
Newsletters and newsletter ads could be a core part of your media asset. They are for many world-class media companies. Or you may start with a newsletter and later focus more on other direct channels.
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