WORKWEEK

The average SaaS business spends between 30-35% of their ARR on marketing. 

The average media business is different. The NYT spent less than 8% of its revenue on marketing in 2020 — and they’re not an exception. After speaking with 10+ media operators, 4 said they spend $0, and 1 brave soul is currently spending 25% with a median of 6%. 

Why does media spend so much less than SaaS? I think there are 2 key reasons:

• Many in media believe “if you build it, they will come” in terms of content, AKA their content drives the organic growth they need to sustain or grow the business.
• Most media operators simply don’t understand how to effectively use paid marketing spend for their business.

We’re going to dig primarily into the latter. 

Note: I’d be lying if I told you what I was about to write applied to page view businesses or subscription-only businesses. This essay is for media operators who are leading hybrid models (advertising, events, subscription, etc.) where newsletters are the core of the business.

How to set yourself up for success

You’ll need a few things for this to make sense: 

• An analytics platform that allows you to have a comprehensive view of your subscribers
• An ESP that allows you to dissect your audience based on engagement 
• Google Analytics account so you can create and track UTMs
• Know your fundamentals: 
  • TAM of your target audience
  • Revenue per Open (RPO) on your newsletter(s) 
  • Conversion Rate (CVR) of your free audience to your paid products
  • Average Revenue per User (ARPU) where user = subscriber
  • Current subscriber payback cycle (and understanding of how much you can extend this given your financials)

I’m hosting a course on how to grow your audience and increase your ARPU next month. We’ll cover a lot of the fundamentals above, including easy ways to identify them and put them into practice. It’ll be 6 live classes over 3 weeks with actionable takeaways around the growth of newsletters. Apply Here if You’re Interested

First 10 people who apply will get early bird pricing and some extras.

Determine your TAM

For most publishers, the total addressable market (TAM) is SO much higher than what they’re currently reaching, AKA most of you are leaving money on the table.

Paid marketing helps you reach that audience and maximize your potential as a business.

• The smaller the TAM, the more specific you have to be with your marketing channel selection. 
• The more broad, the more platforms (like Facebook) you can test and utilize in your marketing mix.

I’d challenge all of you to determine how big you think your audience can actually get. Is it 1,000 people? Is it 1,000,000? 

When thinking through this, consider The NYT: They have 5.65M paid subscribers, but they have a lot of room to grow because they consider the 90M+ college-educated adults in the US to be their TAM.

Know your churn

One big issue in media? Most businesses don’t understand their churn.

For newsletters, I define churn as: [subscribers who click unsubscribe] + [subscribers who stop reading after X amount of days] 

The “X amount of days” depends on whether it’s a daily, bi-weekly, or weekly newsletter — but it’s probably somewhere between 60 and 120 days. That “X” number is critical because it helps you understand how long the average subscriber stays subscribed to your newsletter:

• If you’re churning 2.5% of your audience every month, then a subscriber’s average months on list is roughly ~40 months
• If you’re churning 7.5% per month, then it’s ~13 months 

And that “months on list” number is what you need to calculate MRPU, ARPU, and ultimately, LTV of your average subscriber.

It’s also critical to determining your payback cycle  — and how flexible it can be. Can you afford to be unprofitable on a per subscriber basis for 3 months, 9 months or 15 months? Knowing this sets you and your marketer up for success.

Test ad creative like crazy

May seem obvious, but the success of your paid marketing relies heavily on testing the creative assets you use for those efforts.

My goal at Workweek is to set our marketing team up to test new creative across all channels every week:

• Every Monday, we develop new creative assets — copy focused on different value props, different types of imagery and colors, new ways to stand out in the endless sea of ads out there
• Over the course of the week, we constantly capture and monitor data — what’s working on which channel(s)? If something’s crushing, we double down.
• By the end of the week, we ID the winners and losers, then start developing new creative for next week based on our learnings.

You could use an in-person team, Fiverr, or even an agency to get this going.

Know the cohort

Using cohort analysis is the best way to effectively scale your audience. 

This helps you choose your channels (Facebook, newsletter swaps, etc.) and how much you can afford to acquire users from each channel — it might be worth paying a higher CAC in one channel compared to another because you’ve seen higher quality subscribers come from that channel.

For example, we’re using paid marketing to scale this newsletter — and if we’re acquiring subscribers who are NOT media operators, then we’re wasting money. How can we tell this?

We break our audience into 3 tiers: Gold, Silver, and Bronze. The way we define those tiers is in the image below:

  Refer 1 person to Perpetual and I’ll send you this image. Going forward, you’ll always receive this content unlocked in future newsletters. 

Copy and share your link: https://perpetual.workweek.com/6522d3dd

As you can see, the Gold subscribers have a much higher CAC than any bronze subscribers. Having access to this information allows us to work with paid marketing agencies on a performance basis, i.e. we only pay once someone hits the qualification for a Gold subscriber. It’s efficient affiliate marketing for newsletters subscribers — a huge win. 

If you’re not building the infrastructure to capture and understand this data, you’ll be spending money in the dark. Sometimes you’ll hit, but most of the time you’ll miss.

Understand the current environment

Paid growth for newsletters has changed a lot in recent years.

• 3-5 years ago, you could acquire a quality email subscriber for a more general business newsletter for $2 or less.
• Today, it’s closer to a $8-$15 CAC depending on the audience — and sometimes it’s much, much higher.

Why? One big reason is inbox saturation.
These days, it feels like everyone has a newsletter. Subscribers have SO many more options to choose from — which means it’s harder to keep quality subscribers, AKA churn is on the rise.

This is where making sure you have GREAT content and creators pays off. 

The better the content, the less you have to worry about inbox saturation. Think about Barstool — they’ve probably kept their same core audience for a decade simply because their content for that audience is so good.

Another factor? Disappearing third-party data.
Things like Apple’s mail privacy updates and Google Chrome’s impending block of third-party cookies are making it harder than ever to measure success and collect data. It also means we’re at a critical inflection point: The media company who builds the infrastructure to overcome these changes will be set up to win in 2024 — and the one who doesn’t will die.

Lastly, you need to consider timing.
Black Friday ain’t the time to blow your test budget — you’ll see CACs drop drastically in the New Year. It doesn’t matter if you’re B2B or B2C, timing impacts prices. Factoring timing and seasonality is critical to planning your into your budget and building performance forecasts.

Don’t sacrifice quality for fast growth

Most media operators who come from the content side of the house are naturally against paid growth. They believe the best content will win and would rather invest resources there. 

But, as I pointed out earlier, the best content improves all of your other KPIs like organic growth, lowering churn, and increased LTV… but you might still be leaving money on the table.

This is the role of paid growth in a media business. It’s not to replace quality or reduce an emphasis on editorial, but to help you put fuel on the fire — something I wish more media companies would do.

If you want to learn more about this. Consider applying to my course where I’ll go deep on this entire topic. Apply here.