What determines the price you charge for an ad in your newsletter? From subscriber numbers, to niche, to open rate, there's no perfect formula. Here's how to charge a rate that is fair, works for you, and works for the sponsor.
Factors that impact ad prices
1. Number of subscribers
While there is no hard and fast rule for pricing, on episode 44 of the Newsletter Crew podcast, Pete Codes offered a formula: Charge 5% of the number of subscribers on your list. So, if you have 20,000 readers, you would charge $1,000 for a sponsorship.
2. Open rate
Advertisers will judge your sponsorship rate based on the open rate multiplied by your number of subscribers. For example, you have 1,000 subscribers and your open rate is 53%, the advertiser will consider that as 530 actual impressions.
3. Click rate
The email click-through rate is calculated by the number of subscribers that have clicked on at least one link in your newsletter issue. Many ESPs automatically calculate CTR, but you can also calculate it by taking the number of people that have clicked on your newsletter issue and divide that by the number of emails you have sent. Then multiply it by 100 to get the percentage.
CTR = (No. of unique clicks / No. of emails sent) x 100
The topic you write about matters to sponsors. The more general your niche is, meaning the breadth of interest in your writing, the less sponsors are likely to pay. For more specific niches, the sponsor ad price is often higher, because sponsors take less risk that their product will be of interest to the audience.
Take for example a newsletter about general investing versus a newsletter about angel investing in software products. The latter will command a higher sponsor rate versus the general investing newsletter since the topic is much more focused.
5. Niche saturation
As specific newsletter niches become saturated, advertisers in those niches will have more and more options to reach their target audience. That competition is driving down the price, since several newsletters are competing against each other. If you niche is saturated, you'll want to think of a unique value proposition to offer to sponsors.
6. Ad position
Few newsletters have more than one main sponsor. Are you offering the ad at the top of the newsletter, as a main slot, in the middle, at the end? The physical execution of the ad can have an impact on price.
7. Ad type
Text-based ads are less intrusive, require less space as compared to media included ads. Thus they are cheap as compared to ads with supporting images.
8. Duration of sponsorship
If a brand is sponsoring your newsletter for a long duration, they may insist you lowering your sponsorship rates. In that case, they're agreeing to lock in consistency and reduce risk for you, justifying the lower price. You can decide whether that certainty is worth it or not. Don't forget: If you're actively growing your subscriber base, your sponsorship slots could be significantly more valuable three months down the line.
Types of Sponsorships
1. Classified ads
Classified ads usually offer 150 to 180 characters shown, and appear in each issue of the newsletter. Classifieds include a hyperlink and a bit of text. Here is an example from Indie Letters.
2. Sponsor ads
Sponsor ads allow advertisers to add an image, multiple links, and lengthy ad-copy. It can be 300 characters like Dense Discovery, or over 700 characters, like the ads in Morning Brew. Here's an example from Morning Brew.
Popular Sponsorships Models
Classified ads have fixed rates. Sponsor ads can charge a flat fee or CPM.
1. Flat fee
Charging a flat fee is a great strategy for small newsletters. For example, Dense Discovery charges a flat $375 per sponsor ad. And, its booking process is entirely automated using an ad-booking sheet. You can also automate your ad-booking process by setting up your own ad-booking sheet. To do so, grab the Ad-booking sheet template.
According to Wikipedia, Cost Per Mille (CPM), also called cost per thousand (CPT), is a commonly used measurement in advertising. It is the cost an advertiser pays for one thousand views or clicks of an advertisement.
To calculate your CPM, check other newsletter sponsor ad rates in your niche. This way you can offer a competitive price and understand the general cost of a sponsor. You can also calculate CPM by this formula
CPM = (Cost of sponsor ad / No. of email subscribers) x 100
Generally speaking, cost per thousand views is more rewarding for newsletter creators unless the sponsor is very relevant to the newsletter niche. Only go for cost per thousand clicks if you are pretty sure that subscribers will actually click on the sponsor ad.