Newsletters aren’t business models

The Rebooting and BlueConic recently completed research to examine the state of subscriptions at publishers. One of the key findings was that, for many publishers, subscriptions have moved from being another incremental revenue stream to being the fulcrum of audience-focused businesses, accelerated undoubtedly by changes in social and search traffic patterns. The challenge many have is how to integrate their subscription business with other revenue streams, most notably advertising.

Newsletters aren’t business models

Email newsletters aren’t new. They’ve been the bulwark of many digital publishing models for a long time, particularly in niche areas and B2B. I’ve lived through a few waves of email crazes, dating back to the pre-CAN SPAM Act Wild West days when email lists were brazenly traded in open-air markets.

In recent years, they’ve gotten a second look based on the “overnight” success of Morning Brew and Industry Dive, which appear all the more impressive when set in the post-scale apocalyptic landscape of zombified brands sent off the the SEO glue factory, shriveled distributed media operations.

Email is a handy alternative to all that. It’s cheap, builds a direct connection with an audience that’s less intermediated than other digital distribution channels, and gives off useful first-party data as exhaust. And in a world of algorithmic crap, email newsletters have emerged as a form of human media that’s often an antidote to the over-optimized world publishing. But email is still, at its heart, just a distribution channel, and no publisher should build around a single distribution channel.

Even as a distribution channel, email is not without its sins. The data always tells you to hit send, and email has long attracted those who find the line between performance marketing and spam. The cost of sending an email is close to zero. There’s a reason Black Friday/Cyber Monday/Cyber Week means inbox disaster. Scaling email newsletters usually comes at the expense of quality, as Emanuel Cinca notes.

Thousands of email newsletter businesses have sprung up, in the hopes of being the next Morning Brew or Milk Road or Industry Dive. Many of these Morning Brew of X will go the same way as the Uber of X businesses. Different always wins, and you can’t reverse engineer originality.

Over the last few years I’ve noticed that many of the flaws of scaled digital publishing creeping into email newsletters: the heavy reliance on optimization and growth hacking, drift into arbitrage, the worship of easily gamed vanity metrics, and the short-term approach to building resilient business models.

Growth hacking: Email newsletters biggest challenge has been growth. Organic growth takes a long time, with writers relying on begging people to forward their email around like the chain letter your uncle used to bombard the family with. Instead, new recommendations tools have emerged that have taken “friction” from the discovery process. That’s risked negating email’s biggest strength as a pull medium by making it more like a push medium.

Arbitrage: There are too many email newsletters, of course, because there are too many of everything, especially when the cost of creating an email newsletter is near zero. You can always hire a ghostwriting shop to make one for you, or better yet turn to AI to gin up synthetic newsletters. “If pure AI is your only strategy, it will just become a gigantic numbers/arbitrage game,” one publisher told me. “ Kind of like how pure Amazon affiliate sites thrived from 2009 - 2016. Very thankless and extremely tough to win.”

Vanity metrics: List size is mostly pointless since you can buy a subscriber for $1. But most still focus on how big their list is, even if many are filled with weak audience ties that are hardly better than the drive-by impressions of the social-and-search traffic era.

Business models: Publishing businesses need multiple revenue streams. Subscriptions were painted as a silver bullet, and as our State of Subscriptions report showed, they are a forever business that quickly become optimization challenges to secure incremental growth, not rocket ships. On advertising, as one publisher noted to me, “There’s no newsletter line item” for most marketers. That’s given rise to a subprime feature of email newsletters in which newsletter pay for recommendations only to then defray the acquisition costs by selling recommendations to the recommendations. Call me old fashioned, that doesn’t strike me as the hallmark of a long-term business.

Greg Isenberg recently advised avoiding the email newsletter “trap.” That trap is often the impossible treadmill of write, grow, sell. The frothy ad market of 2021 was an anomaly and will not return. What’s more, email is constrained as an ad business by a lack of “surface area.” Which leads to increased frequency and the risk of the leaky bucket.

“Don't be in the newsletter business,” Greg advises. “Build a business powered by a newsletter.”

The most successful newsletters have branched into other areas. I don’t consider Morning Brew an email publisher for several years now. Even individual newsletter writers like Lenny Rachitsky and Packy McCormick are moving beyond emails into areas like podcasting, advisory and investing. Events are obvious expansion areas.

For some companies like Workweek, email distribution is step 1 to generating direct revenue from subscribers, whether that’s the purchase of an event ticket or subscription to a software product it has rolled out under its franchising newsletter.

What Workweek found was that a pure newsletter model – it has “creators” attached to various industry sectors – is tough to make work on the sales side. Just because you have a big number of email subscribers does not mean you will be able to “turn on the revenue spigot” with advertising. That meant cutting its number of creators by from 17 to 11, and cutting the “operators” paired with those creators.

“Too many creators and operators get caught up in subscriber size or open rates,” Adam wrote in two-year review after Workweek eliminated 11 positions. “These metrics are as effective as when we measured pageviews back in the day — not too helpful and can lead to many false signals.”

Email is usually a means to an ends.

What’s with Silicon Valley’s culture?

Every group becomes insular in its own ways, particularly the power industries. Last week on People vs Algorithms, we discussed the OpenAI drama through the lens of Silicon Valley’s unusual culture, where grownups debate e/acc vs decel, people subscribe to a quasi religion like Effective Altruism, and Brother Spirit is consulted about business decisions.

Get People vs Algorithms on Apple, Spotify and other podcasting platforms.

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