Image credit: Ethan Brooks
Newsletters were the breakout media star in 2020 and continue to explode in popularity. As noted on a recent episode of the podcast “Media Insider,” the number of Substack paying subscribers jumped from roughly 100k to more than half a million over an 18 month period between 2020 and 2021 (Parusinski and Tvrdon). It’s a natural evolution of media, one in which readers get to select trusted writers on the topics most important to them.
As NYT tech journalist Kara Swisher noted as she announced the launch of her newsletter in September, “everyone loves newsletters because they offer writers a fresh, intimate way to connect with readers.” But if you didn’t have the equivalent of Kara Swisher’s NYT platform to launch your newsletter and have instead built up your readership over time, you may be wondering about how to monetize your hard work. If you’ve decided to work with advertisers, you’ll want to do some research in order to prepare to engage advertisers. Understanding the current market and how to price ads is step one. However, searching for guidelines for pricing benchmarks does not yield much clarity. The growth of newsletters as an industry seems to have outpaced the availability of data-informed insights or industry standard that might guide you as in areas like pricing ads.
According to Ethan Brooks, writer for “The Hustle”, it’s largely because pricing is impossible to boil down to a single factor (Ethan is a great follow on Twitter for his insights on business trends in the newsletter industry - @damn_ethan). He suggests that around 75,000-80,000 readers is a good threshold for selling ads. In this twitter exchange, co-founder of Digital Wildcatters Jake Corley states, “There are no rules. You’re only limited in your ability to sell them on the value. If you have 500 downloads on a super niche podcast consistently - that’s the equivalent of 500 people in a room at an industry conference. What’s that worth to potential advertisers?” That’s all fine and well, but there is untapped information out there in this emerging field that can empower creators as they cold call.
Ethan Brooke has a 14-tweet thread on pricing ads, starting with some advice for knowing when you’re ready for ads.
So a large audience, which has already been defined as 75-80K, high open rates (20% or more), and readers ready to spend money. How do you measure your readers' readiness to spend? Ethan offers that media companies can survey their audience and collect data that can inform your strategy and be shared with potential advertisers. Reader analytics should also be used to know which links readers are clicking on in the email to better understand your audience.
Ethan breaks down three ways to charge for ads:
- Cost Per Send (CPS)
Revenue is generated based on the number of emails sent. This is a common way to start ad sales and allows for predictable revenue, however, clients are then paying for emails that are sent but not opened. A flat fee based on the number of subscribers.
- Cost Per Click (CPC)
Revenue is generated based on the number of readers who click an ad. This is less common but clients feel more comfortable paying only for performance. Of course, the revenue is less predictable and does not include compensation for brand awareness created by viewing the ads, even if there is no click. Institute a timeframe for measuring clicks, usually 7-14 days. More attractive to buyers but requires a larger subscriber list.
- Cost Per Open (CPO)
Revenue is generated based on the number of readers who open the email. Mature newsletters commonly switch to this model. Clients don’t pay for unseen emails but there is compensation for brand awareness. Revenue can be unpredictable. Institute a timeframe for measuring opens, usually 7-14 days. More attractive to buyers but requires a larger subscriber list.
Determining which model is best for you depends on your readership and the particular advertiser you work worth. You can scope out other newsletters with similar audience sizes and try to get an idea of what their ads sell for and then set your pricing along the lines of what you think someone would pay. You’ll be adjusting your pricing as you learn and collect feedback and as your newsletter evolves and as you expand the types of advertising available.