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02 Jul

Why Email Newsletters Will Always Be Serious Business

Why Email Newsletters Will Always Be Serious Business

Four years ago to the day, I wrote my last article on email newsletters “Email newsletters are still a serious business”, which was a followup to this original article “Email newsletters are serious business”. It turns out that four years later, email newsletters are even more of a serious business. Instead of profiling what the big businesses are in the space, I wanted to explain why email newsletters are a big business and what drives them. Much of this learning comes from a little unknown fact to most: Onswipe almost never came to be four years ago as I was originally planning to start the Weblogs Inc/Vox Media of email newsletters — that all changed when the iPad was launched in the Spring of 2010.

Email newsletters build a daily habit

Ask any entrepreneur how hard it is to get someone to use their service daily and he will tell you that it’s one of the hardest things to do. In a mobile world, we have 15-20 spaces on our home screen. Half of them are dominated out of the gate by default apps from Google and Apple. Take a look at Betaworks #homescreen2014 to get a sense of how this shakes out. The other half are war zones amongst companies funded to the tunes of billions of dollars to get you to interact with them once a day. Yahoo’s whole new mission is to power your daily habits. Email newsletters are a clever hack to make yourself a daily habit of a user. Email newsletters latch on to the existing habit of email and it’s a societal norm that email newsletters once subscribed to should be coming to you on a daily basis. They’ve since moved on to an app, but my friends at Timehop will tell you that starting out as an email newsletter is what got them started out as a simple daily habit for most. I asked Jonathan, the CEO of Timehop, why he started as an email newsletter. Here’s why:

Built at a hackathon in 8 hours. Email = simple scope — Jonathan Wegener

Push as opposed to pull media

Email newsletters work because they are pushed to you and don’t require a user to constantly pull information. How many times do you visit a homepage of a publisher? Not that often. You might have their app installed, but their push notifications get lost amongst a sea of others. With an email newsletter, it sits in a queue that can be accessed at any time. Once you have a subscriber, they’re there until they unsubscribe, which is hopefully low. That’s the power of push media. With pull media, a site has to hope that they can get a user back again either through brand loyalty via the homepage, being one of many links opened on Facebook, or often being found through Google. With more and more content being produced everyday, pull media is difficult. Would you rather have 2 million unique visitors that are pulled to the site or 2 million unique visitors that are pushed to your content via an email newsletter? 2 million unique visitors are likely coming from a handful of articles performing well on social media and google, with no guarantee that the visitor will come back again to your site. They might, but that requires you to constantly produce content that’s optimized at the whim of someone else’s algorithms. With push media, 2 million subscribers are going to be seeing your content everyday. Once you have their email, they will constantly get your content, until it becomes stale.

Simple and concise

Email newsletters are simple and to the point. They are either a short blurb or a list of articles that are curated to your liking. A great example of this is http://theskimm.com . Their entire value proposition is to give you all the information you need in one email everyday. It’s simple and concise. Have you taken a look at most content today? It’s a mess with widgets and advertising all over the place. Getting the content you came for is quite difficult. Email newsletters buck this trend, by keeping it simple stupid. People want simplicity and they want brevity. They’re inundated with hundreds of other messages a day and email newsletters give that to them in a simple to digest format that is concise.

Trust is built with the consumer

Email newsletters build trust between a reader and the publication. It’s not just trust by getting access into the inbox, but it’s trust on the subject matter at hand. Take a look at MediaREDEF. Jason has built an email newsletter that has become the trusted source of what to read. Daily Candy was the trusted source for food and lifestyle locally. In a world where machines seem to pick everything we read, there is a lot of value in having a human carefully spending hours to bring you a great piece of content everyday. That is trust on a grand scale and very valuable. Travelzoo, which is now much more than an email newsletter got its start as a simple email newsletter in 1998 that was delivered at 11 am on the dot with the best travel deals. Email newsletters are a great way to start building trust for a bigger idea.

Ubiquitous and cross screen

The last time I wrote an article on email newsletters, the Post PC Era was really just beginning. The iPhone 4 was just launched, the iPad was questionable, and Android Froyo 2.2 was brand spanking new. We now live in a world of many devices and many screens. Having content that can go cross screen is the most important thing you can focus on. Email is the one platform that just works nicely across every single screen. Not only does email go cross screen, it is ubiquitous. Every single mobile device has an email client installed on it from the start. We also have our mobile devices on us all day long now, which means that email newsletters are going to see more usage. I’d boldly say, that now is the best time ever to start an email newsletter.

Clear business model

Email newsletters have very clean and clear business model options. They can be ad supported like Daily Candy was. Advertising is a tough business and I don’t recommend it. The two alternative options are in the realm of “selling” something:

When targeted towards business, email newsletters can charge for content. Think whitepapers, subscriptions, and valuable information. Hfalert.com is one example here.

When targeted to a consumer, email newsletters can be drivers of ECommerce. This last one is actually my favorite. GroupOn was really just the world’s most successful email newsletter before it started branching out. Once a day, you’d get an email with something to buy at a good price. Woot was the same. People LOVED their emails and some of the time they’d buy a product that was mentioned. I think this business model has the most potential with the rise of mobile commerce. We now expect services to be all in one — see what you like and then one click buy it. Uber has done this with services and companies like TheFancy have done this with products. I’d have to imagine that if the Daily Candy were started today, you’d be able to buy the products that were sent to you on a daily basis. Let’s do some simple economics — assuming 2 million subscribers like we talked about before and each subscriber purchases one item per month at an average cart price of $50, you’re looking at $1.2 billion gross revenue, with $120 million per year net revenue with a 10% rake. Once again simple economics — churn not factored in, cart price is finger in the air, and once a month purchase is tough.

SaaS like economics

This may seem odd at first as it’s a content business, but I look at email newsletters very much like a SaaS business. Why? Because it’s predictable with people subscribing to your “content service”. Most content businesses can’t have SaaS economics due the fluctuations in repeat traffic and customer acquisiton. Here’s how it breaks down:

CAC — The cost to acquire the subscriber to the email newsletter. In many cases this could be zero.

LTV — Think of this in terms of the value the customer will have for you over their subscription life period. If it’s commerce, it’s (Subscriber*Transactions Per Month*Average Transaction Value). If it’s advertising it’s more like (Subcriber*Open Rate*CPM*30). Multiply all of these out times the Lifetime of the customer in months.

Churn — This is the important one, especially at scale. A churn rate of 2% at 10,000 subcribers is only 200 lost subscribers. At 2,000,000 subscribers, 2% is a loss of 40,000 subscribers. To have a positive growth business, you need to be adding more subscribers than you’re losing. At scale, that’s CAC * 40,000, not CAC *200.

Once again, this is where I think ecommerce makes more sense. Advertising isn’t as predictable as commerce. You won’t be able to monetize until you’re at a good scale, you’re at the whim of media buyers, and quarterly fluctuations. You also can’t use any programmatic sources with email. Ecommerce allows you to start scaling from day one, though it will require a team to source the items to sell.

I could have put the same post together four years ago for the most part… and that’s a good thing. Email newsletters have not only survived the biggest four years of technological change, they’ve actually gotten stronger due to the last two points. If I’m missing anything, email me at j@jasonlbaptiste.com

Thanks to @daveambrose @jwegener