Email Newsletters Are Serious Business

I’ve been doing a fair amount of research lately on tons of different sectors.  One I’ve taken a hard look at is online publishing, specifically online local news and journalism.  I’m also an avid reader of online publications with 200+ in my RSS reader, which I’ve been using since 2004.  To be honest, most of the time when people think of online publishing they think of blogs like TechCrunch, Perez Hilton, Gawker, etc.  I started noticing a trend in online publishing after reading a few articles that caught my eye, and then I started to dig in a whole lot further.  It’s actually kind of crazy as this trend isn’t based upon some insane new “buzzword laden paradigm shifting technology that leverages social media via the cloud”, but the one simple technology we’ve had forever: Email. Email Newsletters are making an absolute fortune. Here are some examples of companies that you probably have never heard of (unless you’re involved in the industry), but are making a fortune.  More importantly, I’ve also outlined some of the underlying causes for their success. UPDATE:  I put together a follow-up/sequel post that you can read next over here.

Case 1:  Daily Candy

Daily Candy was founded in 2000, and originally took a majority investment from Bob Pittman in 2003 for approx 3 million dollars.  In 2008, they were sold to Comcast for $125,000,000. That’s right- 9 f**king digits.  I remember hearing about these rumors when they first started to surface in 2006, and I took a look at DailyCandy.  I thought I was missing something since the site was just for an email newsletter.  I thought there had to be some social network or great hot new product I was missing.  Nope, it was just that an email newsletter.  Here’s a breakdown of the stats:

Subscribers: 2.5 Million
Revenue: Around 25 million in revenue with EBITDA of 10 million
Sold For: $125 Million

Case 2:  Thrillist

Thrillist is like DailyCandy, but for 20 something guys.  They’re in multiple cities, and also have money from Bob Pittman’s Pilot Group.  The founders were also named to Inc.’s 30 under 30 founders.  They basically find the hip places in town and cool things to do on the weekend.  They’re making great cash as well with an expected $5-10 in revenue, along with a 7 figure EBITDA.  The gap is big, since these numbers were reported in early 09, when the recession was still the wild card for making projections.  Doesn’t matter, they’re doing well, and in 10+ cities already, with more to come.  Here’s a breakdown of the stats:

Subscribers: Approx 650k subscribers as of Q1 09
Revenue: $5-10 million in revenue and EBITDA in the seven figures
CPM For A Video Ad: $275 Dollars (whoa).  Of course this is the “advertised” rate, so who knows what it really goes for, but it’s high either way.

Case 3:  Help a Reporter Out

HARO (help a reporter out) was started by Peter Shankman after his Facebook Group got a little bit too big.  The concept is similar to the horrible legacy system of ProfNet.  Reporters need a source or expert for a story they are working on.  Peter sends out three emails a day to subscribers with reporters looking for experts on a subject/story.  If the person is an expert/source for the story, they email the reporter.  ie- I subscribe to it.  If a reporter is looking for someone who has a site to help family’s keep in touch+communicate, I would respond with Ramamia.  If you spam the reporters, you’re banned from the list, so quality control isn’t a huge issue.  Oh yeah, he’s raking the cash in with $1 million in revenues for 2009, with ads completely sold out for the rest of the year.  Here are the stats:

Subscribers: 110k (30,000 Journalists and 80,000 “Sources”)
Revenues: $1 Million+
Ads: Sold out For All of 2009.
Email Open Rate: 81%

Case 4: Jason Calacanis’ List

Jason Calacanis started weblogs inc and sold it to aol for $25 million (which was a steal).  He maintained a blog at calacanis.com that was updated regularly, until sometime in 2008 when he switched to an email newsletter.  That’s right, the man who made enough money from blogging to buy lots of Teslas, bulldogs, and Calacompounds abandoned it for Email Newsletters.  Why? It gave him a better relationship with his readers, got rid of trolls, and allowed for a much higher level of engagement.  The newsletters usually get reposted all over the well, but they’re primarily delivered by email.  I’m a subscriber to the list, and have read every post… in my email box.

Subscribers: As of April 14,000.  I’d venture to say >15,000 but <20,000 right now.  They’re tech influencers and a very targeted audience.  If I had the money, I would sponsor the newsletter for the right product.

Case 5: Ideal Bite

Ideal Bite is another once a day newsletter with tips on being eco friendly and living a greener lifestyle.  Going green is big bucks.  Yes, they also took money from bob pittman, but they sold to Disney for 15-20 million dollars.  They are not localized, but they certainly reach a niche.  CNet says the audience is basically the following:

“he site’s median household income is $82,000, press materials state; the median age is 35; and the target demographic is the sort that “drinks organic wine after yoga. aka Yuppie Moms”

Here are the stats:

Subscribers: 150k+
Acquired For: $20 Million

Bonus Case: The Origins of Craigs List

From Craigs List FAQ:

Q: What is the origin of craigslist?
A: An email list of SF events, started as a hobby by Craig Newmark in early 1995.

The “list” in Craigslist was originally a daily email Craig sent to his friends in SF.  It eventually grew beyond that into a UGC website, but that was the basic gist of how it got started.  I don’t think craigs list could have scaled out as an email newsletter nation wide for many reasons.  Thanks for Coglethorpe on Hacker News for reminding me of this.

Notable Mentions

• Very Short List
• Mamaista
• UrbanDaddy
• Vital Juice (Bob Pittman Funded as well)

Why Do Email Newsletters Work?

These points are opinion, but I think they’re valid after seeing the past successes outlined above and some others.  Chime in via the comments and I’ll update the post as need be.

• Opt-In and Permission Based–  Email newsletters like those above are comprised of people saying “please enter my scared space” (that’s what she said).  They want to hear from companies like Daily Candy and Thrillist.  That’s the type of engagement that advertisers kill for.  By advertising with an email newsletter, they gain trust and get eyeballs that actually provide utility.  It’s the complete opposite of advertising on Myspace or some other penny driven CPM area.
• Usually a Targeted Demographic or Crowd- Each and every newsletter has a well defined niche and crowd.  They know their audience and who they are targeting.  They’re not going with a spray and pray approach, but an audience that is valuable to advertisers.
• It Provides Some Sort of Utility or Gratification To The Reader- HARO provides sources with a chance to get their name out there and in an article, Thrillist gives you awesome things to do, Ideal Bite makes you greener,etc.  They all add some type of utility to a person’s life.
• Very Easy to Digest- DailyCandy is really short, sweet, and to the point.  They also write positive articles.  They aren’t rants or whining typical of the blogosphere.  Seriously, the negative energy going online in the blogosphere is pretty crummy.  People like to see something that picks them up.
  
• Localized Where Possible- If the content can be localized to cities, it is.  This is a mix between the utility/gratification + targeted crowd logic.  I remember in pro wrestling, the bad guy or good guy would get a rise out of the crowd by insulting or complementing the local community.  People love their town and if you can be a voice of authority/utility for what’s going on there, it’s pretty valuable.  It also lets advertisers get very targeted.  The crowd in Miami is much different than that of Philadelphia.
• Retention Guaranteed- Your subscribers are coming back/being engaged every day.  Get past all the hype and it’s what this whole push/real time web should be about.  I create content, I want my users back every day.  RSS does a poor job of doing this for the mainstream.  Most people only remember to check X number of sites a day and besides the geeks, RSS is and never will be mainstream (will update with stats on that, because I know Dave Winer is lurking somewhere with a knife to kill me).  Email brings people back.  That’s valuable.

Nothing is easy, so this isn’t a call to arms for everyone to drop blogging/twittering and go back to email newsletters.  Both have their place and serve distinct purposes.  I’m saying that in today’s day and age of what’s shiny/new/hip in technology, we often overlook things that aren’t sexy.  Email newsletters may not be sexy, but they are profitable, work well, and provide a ton of value to their readers.  Email is far from dead just ask any of the companies above or other companies like Posterous.  If anyone is interested in the space/has experience/comments, feel free to leave a comment here or reach out via email j@jasonlbaptiste.com.  Would love to chat. UPDATE:  I put together a follow-up/sequel post that you can read next over here.