Are Newsletters Good Businesses?

0:00Welcome to Marketing School, the only podcast that provides daily top-level marketing tips and strategies from entrepreneurs that practice what they preach and live what they teach. Let's start leveling up your marketing knowledge with your instructors, Neil Patel and Eric Su. Today we're going to talk about if newsletters are actually a good business. So I'm going to kick this one off. This is by the Press Gazette, Future of Media. Reveals the top 27 highest earning substack newsletters that generate over$22 million a year. So it shows that at least five substacks, so this is the newsletter kind of service, draws in over 1 million annually.

0:43And you can see that this newsletter over here, Letters from American, 5 million a year, 1.5, Lenny's newsletter, which talks about startups and product. So it shows that Substack, even though it's been around for a couple of years, that people are starting to build significant businesses off of them. And these people are just monetizing strictly off of, or mainly off of subscribers. So charging like$10 a month or $100 a month or something like that. And then this might be the implied pay ranges for people that are monetizing through kind of the complete cycle. So Neil, any thoughts on this out the gate?

1:15Well, one of the biggest newsletter businesses out there is Agora. They have, you know, Money Map, Agora Financial, Palm Beach. You're talking about a multi-billion dollar organization. I don't know what their revenues are recently, but I know in the past few years, they're doing revenues when you start combining all of it, of a billion plus dollars a year. That's a lot of income for a newsletter business. And here's what a lot of businesses don't talk about with newsletters is when you get someone to subscribe for a newsletter and they pay you a little bit of money, anytime you push out anything marketing related to them, they're super active and they're much more likely to take action on it versus if you just have someone sign up for a newsletter that is purely free.

1:56So paid newsletter, the subscribers are much more active and are much more likely to do what you do when you're pushing out marketing related stuff to them versus people who don't pay for a newsletter subscription. Now, this doesn't mean that you should be charging for your newsletter or you shouldn't be because of course, a free newsletter will have many more subscribers than a paid one. You could in theory do a combination of both, but it is a good business. It's modern version of someone charging for New York times or wall street journal or any of those. Yeah. So what I'll say is, I remember one of the biggest SaaS conferences, if not the biggest SaaS conference in the world is Saster.

2:36And I think they do north of 20 million. And Jason Lemkin, the founder says, the one thing that's been most constant for them is whenever they push out a newsletter, they're going to get sales, right? It's basically like going to the cash register. Now that doesn't mean you could just push out the newsletter every time and say, go buy something. It means you have to provide a lot of value. And a lot of these newsletters, like Lenny's newsletter, it's great. There's a lot of startup founders and a lot of product of people like reading it. And he brings in unique insights because he used to be a product guy at Airbnb, I believe.

3:03So what you can do is you can monetize through subscriptions, you can monetize through ads. And then in some cases, you can sell your products or your services in there. And I'll be honest, I mean, we probably should have started a newsletter with marketing school, it probably would have been good for building community and we'll work towards getting there. But we're just focused on building the pod right now. And we're focused on building the YouTube so we can get more views. But if we had a newsletter, and we just summarize our content each week, we had a copywriter that was on it, but we're just like, let's just focus on kind of what's in front of us.

3:30We probably could do a lot more. And so there are Morning Brew, as an example, they're doing like 70 or$80 million a year right now. I know the hustle, I think sold to HubSpot for like 27 million or so. And then we have a client named Axios. They sold for like$553 million. And so newsletters are a very significant business. And I think if done right, if you're going to do it, do it right. There's a lot of great... I think there's one guy, his name is Matt McGarry. And he does a really good job of sharing the economics of newsletters because he's helped the hustle and he's helped the Morning Brew grow.

4:01I've actually gone to him behind the scenes and see if he'll help us grow ours on a performance basis. That way, incentives are a lot more aligned there. So he shared some numbers. And he basically said that he believes that for each subscriber that you have, you should be making at least 50 cents each month. So if you have 10 ,000 subscribers each month, you should be making at least$5 ,000 a month. And so if you have a newsletter with 10 ,000 and you're like a solopreneur, you're making 60 grand a year on it. Let's just say you double it. That's 120 grand. That's decent money for writing a newsletter.

4:30And then you can work towards scaling it. So I think it's a great business. It also depends on the region your subscribers are in. So keep that in mind too, right? Currency exchange or currency rates in India or Philippines is not the same as they are in the Yeah, we're talking US here. Yep. It is important to know where they're coming from as well. But yeah, no, newsletters are a good business. The reason I've never charged for a newsletter, I know a lot of other people make money from it. I just don't think they're the best business. Because look, if you can make that much money from a newsletter, imagine how much more money you can make from selling a product or service.

5:03I would argue you do make money from it because you have your service. Yeah, but why even charge for the newsletter? I'd rather just have a much... You don't need to charge for it. I'm just saying you're monetizing through your service. That's my point. No, no, totally agree. But I'm saying some people just make their money by charging for a newsletter and being on there, right? And I believe that a better business model is not to charge to be on a newsletter, but instead to charge for a product or service. That's the real value. The multiples are also better when you sell a business. Like let's say if you had a big newsletter and you push people to sign up for your SaaS product and your churn rate is great with your SaaS product or it's low, that's probably a better word to use.

5:44If someone's going to give you six, seven, eight, 10 times revenue. That's a much better business. Yep. So look, I think at the end of the day, Neil's got his newsletter. I've got my newsletter too. But if we were ever to do a marketing school newsletter, it'd probably be more ad driven because we sell ads on this one and we have very similar businesses. So we don't know how we would do that. I guess you'll find out in the future we can strategize live, but that is it for today. Please don't forget to rate, resubscribe this pod, leave your email if you do, and we'll pick one lucky winner to come on every now and then to ask a question live.

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