Are Newsletter Businesses Dying?

So everyone's talking about newsletters. Are newsletters actually a good business? I have some numbers to share over here, and Neil actually came up with this idea right before we started recording, so this is a fresh one. And I have some numbers. So I believe, and Sam Park can correct me, but I'm pretty sure The Hustle sold for about $25 to $27 million. So they were a newsletter. They talked about current events, business, and all that. Morning Brew, they had multiple newsletters, I believe. They sold for about $75 million. And they're doing about $80 million a year in revenue right now. So I'll call it that. And then I have a friend who does about $30 million a year with his newsletter. They spend about $1 million a month or so on ads. And another friend, they do about $20 million a year and they're spending about $800,000 a month just to buy more emails. So the question we're trying to address here is, are newsletters actually a good business? And Neil, I'll bump it over to you.

I think they're terrible businesses. I think having a newsletter is smart, but monetizing a newsletter by subscriptions is a terrible business.

You mean ads?

Yes, make money, and you can do ads. And yes, it can make money. And I'm not saying it's a terrible business from a cash flow standpoint, but if you have that audience, you can make way more money just selling something else. So for example, if you have a newsletter on buying and selling companies, you probably would make more money if you had a fund and you were buying the companies yourself and people are saying, hey, check out this company, check out that company. And you were just continually growing your cash flow from that standpoint. You know, the hustle and a lot of them, yes, you can make money, but it's hard to make $500 million selling a newsletter business or $1 billion. And I'm not saying my business is at the level where I can make billions of dollars either. But what I'm getting at is if you go after a market that has a big TAM, TAM stands for total addressable market, of $100 billion or whatever the number is, It's much easier to capture $100 million of it or $50 million of it than going after a market that's much smaller and be like, I'm going to capture 10% of it. Like, it's just hard. And that's why I think newsletter businesses are bad businesses because they're monetized in the wrong way. Selling subscriptions for a newsletter, you know, won't make you as much money versus selling something else. What the else is, is it depends on your newsletter.

Yep. So what I want to call out for the newsletters that I mentioned, most of them are monetized through ads. And what Neil's saying with the subscribers, there are a lot of Substacks out there that monetize through these $10 subscriptions. And I think it's a great hustle for one person. There's nothing wrong with that. I think it's a great lifestyle business, right? You can make a couple hundred thousand dollars a year, which is fantastic. But when you look at, for example, there are some investing newsletters out there. And these are, when you think about Quill Intelligence ran by Danielle DiMartino Booth, and then you think about like even ARK Invest, for example, Cathie Wood, right? Like they don't need that many readers for their newsletters, but the people that read their newsletters are very high net worth. And these are investors that are willing to, that could become future LPs, for example, right? So limited partners in a fund. So the other thing is like, sure, you could have a fund, but even in the back end, just a high LTV product, it could be like a high LTV service. Like Neil and I, we have agencies, right? And an account might be worth 6 to 7 to 8 figures or so. And you might be willing to wait longer for that. And by the way, because you have high LTV, you can spend more on acquiring newsletters and you can afford to wait a little longer too. So that's also the additional benefit. But I think the main point here is that If you're going to do a newsletter, if you have the propensity to create a business or even buy a business and like you have a good product or service and it's worth a lot of money, you're probably better suited because you're better monetizing that attention. That's all we're really saying at the end of the day.

Yes. Like a Cathie Wood, for example, like Eric mentioned, instead of her selling ads or charging a subscription, she's better off having more people on her newsletter, people loving her, and they'd be like, sovereign wealth fund being like, hey, here's $500 million or $1 billion that we want to put in your fund. That's going to make her more money. All we're getting at is think bigger picture with a newsletter versus monetizing through subscriptions or ads.

Yeah. And again, just to reinforce, just to triple reinforce for everyone, look, at the end, the name of the game is attention. What I said about Peter Drucker, 2 things that matter with the business, marketing and innovation, right? The good thing about the newsletter is you can innovate with the content. If you set the bar high with your content, people are going to look forward to the next email that you send. The newsletter itself is a nice attention mechanism. It's just you need to figure out the right monetization vehicle for it. That's all it really means. What do you have next here?

Dude, speaking of attention, you and I were talking about this a little bit earlier. I love hanging out. Eric was asking me earlier and he gets it as well. He does similar things. I love hanging out with people who are very different than I am and I may not align with them. And I'll give you an example of this. You know, the other day I met someone who hasn't really done any business. They got in trouble with the law. And let's just say they monetize by teaching people how to make money. And they have tons of fancy cars. I can't even count. But I look at all these fancy cars, you're talking about millions of dollars in fancy cars. And I remember talking to them, I was like, why don't you buy a house? And they're like, oh, they're a waste of money. The cars make me money. I was like, well, 1 or 2 cars maybe if you want to showcase them off on social media, but paying all this money on rent, you probably would've just been better off having less cars and buying a house. But the reason I like hanging out with a lot of people that I don't align with is you can learn from anyone. So for example, forget how this person makes their money and if it's ethical or not. You know, one thing I learned from them is about being polarizing. So they were talking about political content that they end up pushing out. When they were showcasing to me the amount of revenue that they end up making from their polarizing content versus non-polarizing content, it's drastic. Like you're talking about their non-polarizing content doesn't, it may get views, but it brings in very little leads and revenue. But on the flip side, their polarizing content, Makes them a ton of money. And they say whatever they want. They don't care what people think. And they know it's polarizing. But, you know, looking at it from a marketing angle, it can do wonders for you. Or even yesterday, I was hanging out with someone who has a yacht and they're telling me about all these yacht parties that they throw and what it's done for them. And it's just, it's really cool seeing how other people can think differently, which is You know, I know you guys all know that, but what they're thinking differently and them executing on how, you know, their strategies based on their own thought process, what it actually brings from a traffic perspective or a revenue perspective or a branding perspective. And just overall for me, I end up just learning a lot from people who are very different.

Yeah, look, to me, this is the keyword here is learning. You can learn from books, you can learn from mentors, you can learn from coaches, you can also learn from peers, you can learn from people in different industries. There's always something you can pull. Oh, that sounds really interesting. How do I make it my own for my own industry? Right? So not saying like we're going to become polarizing or anything like that, but it's there might be the little thing that that they did with their business, maybe from like a maybe from like a tax advantage standpoint. Like you never know, right? But that's why I am a big believer in events. I'm a big believer in masterminds. I'm a big believer in dinners because sometimes you're just going to learn that one insight that pays for the whole thing. It pays for all the time that you spend there, and you know. I think it's okay. Like if you hang out with ex— I think you said it was an ex-convict, Neil?

No comment.

Okay. So anyway, well, we'll leave that one alone, but I think there's something to learn from everyone. That's what we're trying to say at the end of the day. Now, that actually leads to the next topic here. Let's go a little deeper here. Where does polarizing marketing actually fit in? So we talked about on the phone, we're saying Trump's obviously a very polarizing figure, right? Like even if we mentioned that name, people are probably like, There's going to be someone that's like, how could you talk about Trump? Right? But we had a nice conversation around this. And do you remember what we talked about, Neil?

No.

Okay. So here's what we talked about. So we were like, look, polarizing marketing works for some people and they don't give a crap and it's okay. It works for their brand, right? But for the vast majority of people, Even though you can say something controversial, like it's really good. Like you'll get a lot of views at the end of the day, but also keep in mind, you're also going to turn a lot of people off. And like for the type of business that Neil has and type of business that I have, we don't necessarily want to be turning people off. Like we're in a client services business, right? So, but if you are, you're just creating your own product or maybe you're just a personality or a character, maybe you can be polarizing. Like Andrew Tate, for example, like he was very polarizing. Now he's trying to, You know, change his image a little bit. You know, you can argue that he's a very polarizing figure and, you know, it's worked out for him. And I would say he's very much a character. I think he's a smart guy and I think he knows what he's doing, but he decided that he needed to double, triple down. And he knows the more intense things that he says, the more views that he's going to get. And that's the game that he decided to play. So, the question for you is, does polarizing marketing fit into your business? You have to be the decision maker on that.

Dude, totally. And it's just like, you know, you and I, we've never done the car thing or flashy home thing or anything like that. And there's, you know, we haven't used lifestyle as a marketing. We haven't used polarized content as a marketing. Lifestyle can also be really polarizing too. And you and I have the perspective that if you actually look at the largest companies in the world, they're not using polarizing content. They're not using lifestyle marketing. Now, it doesn't mean those strategies are wrong. It's just, they're just an avenue to generate more attention. We feel the real way to generate the best attention is through things like your product or your service and the results versus showing what you have.

Yeah. We want to play long-term games with long-term people. You can't really see it in my video over here, but I have Warren Buffett and the late Charlie Munger as statues just constantly to remind me to play those long-term games, right? But at the same time, you think about these 2, have either Warren Buffett or Charlie Munger, have they done anything polarizing before? I can't think of one thing that they've done. They're just like old men that like investing and they wear suits, they drink Coke and they eat See's Candies. That is the extent of what they do. And they just try to help as much as they can. They give their money away and they enjoy their life. And that's a nice way to go about it, I think. And that's what works for us. So, You decide the games that you want to play. We just prefer to play the games that are in our mind, or in my mind at least, a little more long-term. So let's go. What else do you have next?

Yeah, so one thing that I want to talk about is a strategy that Apple uses, and it's just allowed them to do extremely well over time. A lot of other players use it as well, and it's nothing crazy in marketing, But if you look at Apple and one thing that they've always done for many, many years is they have multiple products. And, you know, and when I say multiple products, I'm talking about like an iPhone. So if they have iPhone 15, they have iPhone 15, iPhone 15 Plus, iPhone 15 Pro, iPhone 15 Pro Max. So typically when you look at a lot of Apple products, they have 3 or 4 or 5 options, maybe not 5, but they have quite a bit. And the reason they end up doing this is because let's say if they just had 2 options, let's go the iPhone 15 at $799, that's not bad. But then if you want to get the iPhone Pro Max, that's almost $1,200. You're going from $800 in essence to $1,200. That's a $400 price difference. But when you have iPhone 15 for $800, you have an iPhone 15 Plus for $900, you have an iPhone 15 Pro for $1,000, and then you have an iPhone Pro, 15 Pro Max for $1,200, you're like, oh, the iPhone Pro isn't that expensive, or the Pro Max isn't that expensive because you're comparing it to the earlier options. It's the same thing with like popcorn. If you go to a movie theater, they're like, small popcorn, you know, uh, $2, medium $4, large, you know, brands like—

These are like double prices, man.

$5. And then you're just like, Wait, $5 versus $4, that's a pretty good deal. It's like 4 times larger than small and it's not that much more expensive, right? But if you just had large and small, the large is expensive. You add in the medium in there, it ends up making people think that, oh, all right, the large one isn't that expensive. But people have been using this for ages and New York Times ran a study, an A/B test long, long time ago when they had a monthly subscription. And what sometimes people do is they have one option that's a terrible price and another one that's a good price. Like saying you can get all this stuff, New York Times, et cetera, $9 a month. Or for $9 a month, you can get the New York Times and you get these videos and you get all this stuff. People are like, wait, this is the same price. This is a really good deal. For the same price, you're getting 3 more things. You know, why would they even have this lower price? It must be an error. And then people just choose the— You know, same price option that gives you way more.

I think, Neil, you might be referring to The Economist test. It could be a New York Times one as well, but I really remember The Economist one where they did this like digital plus physical.

Yeah, it's probably The Economist.

Yeah. So everyone go search up The Economist one. It's a really good case study, but hopefully this guides your pricing as well, which is why it's nice to always have a small, medium, large option. And we find that people will typically pick the medium option because they're like, oh no, let's just go with that one, right? But when you do small and large, it, it, um, people will typically go with the small one. So that's all it is. And please don't forget to rate, review, subscribe. Subscribe to us on YouTube. It helps us a lot. That is the number one thing we're going for in 2024. So subscribe to us on YouTube and we will see you later. Bye.