Thread by @damn_ethan

Thinking of investing in the newsletter space?

Here's your executive summary -- everything you need to know in 3 mins or less, including:

-How the media industry is changing
-How the business model works
-Major funding & acquisition deals
-etc

Based on 6+ months research 🧵...

The media industry is changing.

Since '08, newspapers have experienced a 68% drop in ad revenue. Down to roughly HALF what it was in 1956.

brookings.edu/research/local…

Papers are folding left and right.

In 2020, Berkshire Hathaway sold its 30-paper news unit to Lee Enterprises for $140m.

Today, 200 US counties have neither daily nor weekly news papers.

Newsletters may fill this void:

Across 40 countries, ~16% of readers get news via email (~21% in US).

🌏 Worldwide: ~4B email users with ~100m joining each year.

🇺🇸 US: ~252m unique email users w/ ~4-6m joining each year.

Still lots of opportunity.

bit.ly/3xmugdp

COVID had a huge impact on newsletter signups.

@TheAtlantic added 90k paying subs between March and May 2020.

@SubstackInc grew to 250k+ paying subscribers by Dec. Reportedly 500k+ today.

backlinko.com/substack-users

2020 also saw lots of high profile journalists spin up their own newsletters:

Long-time print publications are making major bets on email too:

🗞️ NYT shifted from ad-driven to primarily subscription-driven revenue

☕ Business Insider bought a controlling stake in Morning Brew for $75m

📣 Forbes announced it's working on newsletter publishing tools

The Online News Association further legitimized the space by adding an "Excellence in Newsletters" category to its annual awards.

(congrats to @JuddLegum who took home the very first 😉)

Here's how the business model works:

You make money via...
-Free subscriptions (monetized via ads)
-Low-cost subscriptions
-High-cost subscriptions

Readers move like this:
Free -> Low-cost -> High cost

Much more on this here:

Let's talk about roadmaps for hiring, growing, and scaling revenue.

Broadly speaking, newsletters grow through 3 key phases:

0 - 10k Readers: Finding product fit
10k - 100k Readers: Monetizing
100k - 1m+ Readers: Scale

Here's a look at how Morning Brew's revenue evolved.

2 things often happen when a newsletter passes 100k subscribers:

1️⃣ Failed deliveries start to cut into revenue at this point, so they often upgrade their technical stack to fix.

2️⃣ Make their first technical hire.

Here's a closer look at MB's team size over time.

Here's one more look, showing Morning Brew's hiring roadmap vs revenue.

If you're hiring, or advising a portfolio company hopefully you find these helpful.

As for major deals -- I worked on this one for a while, but they just don't translate well to tweet form.

So here's a doc with a bunch of data on industry leaders, funding, acquisitions, and people to follow (including other investors in this space)

docs.google.com/document/d/1SH…

If you found this interesting or helpful, follow me (@damn_ethan) and check out trends.co.

We've got 300+ pages of distilled research & examples to share over the next 38 days.

DM if you have questions or want me on your podcast. Happy to dish!

TL;DR

-Newspapers are folding left and right
-Newsletters might fill the void
-COVID led to a huge subscription bump
-Large companies like Forbes & NYT are bullish
-Newsletters grow through 3 main phases
-Hiring goes Editorial > Technical > Revenue
-100k subs is a crucial time.