Faster Than Normal by Alex Brogan - Part 2

"Pricing ads is half art, half science"

Author

Ciler Demiralp
November 12, 2023

Newsletter Circle is the newsletter all about newsletters.

👉 Every Sunday, you will read the unique journey of a different newsletter creator and learn more about how to start, grow and monetize your own newsletter.

👉 Every Wednesday, you will read articles and the list of curated resources to level up your newsletter business.

🎙CREATOR INTERVIEW

Today’s is the second issue of our two-part interview series with Alex Brogran.

Alex Brogan scaled two newsletters to 50,000 and 60,000 subscribers (and 5-figures in monthly revenue) in the last 18 months.

It is obvious that he cracked the code of building a profitable newsletter business.

Last week, we had a closer look at:

  • How Alex kickstarted his newsletter journey

  • Why having a newsletter is the rock-solid foundation of any online business

  • The evolution of growth strategies he masterfully employed along the way

In case you missed it, read The Part 1 here.

Today is all about monetization. He‘ll share:

  • The right time to start monetizing a newsletter

  • How to price newsletter ads

  • The most critical factors to turn a partnership into success

Get ready to level up your newsletter game and let’s dive in!

Faster Than Normal

🏷 NEWSLETTER IDENTITY CARD

Faster Than Normal - Newsletter Identity Card

🛠 Tool Stack

💸 MONETIZATION

When is the right time to monetize a newsletter?

"The short answer to “When to monetize?” is as soon as you’d like to or have the opportunity to.”

This can be when:

  1. You need to pay your bills

  2. You find brands that you’d like to become an affiliate for that your readers would love

  3. Your readers are asking for a digital product

  4. Your readers are asking for coaching

  5. Your subscriber base is large enough that you start attracting inbound sponsorship interest

  6. You have the skills or expertise to charge immediately for premium subscriptions

There are no rules or correct answers here, only what’s right for you. In most cases, first-timers (myself included) overthink this question.

In reality, you’ll have hundreds of opportunities to monetize and it’s an ongoing evolution—not one distinct event.

That said, here are two critical pieces of advice to consider: 

  1. Begin with the end in mind

This one is simple: Don’t hamstring yourself by committing to a pathway too early that might be sub-optimal in the long term.

Examples of this include:

  1. Becoming an affiliate for someone else’s digital product when you plan to make and sell a similar digital product in the future. This can cause a loss of trust in your audience.

  2. Creating a paid newsletter by putting a paywall around your content. In turn, this limits your total subscribers (and growth) and ability to take advantage of other monetization opportunities (like Sponsorships).

When in doubt, optimize for optionality. If you’re not in a rush, play the long game.

  1. Start when you can demonstrate demand

A more specific answer to the when to monetise question is: 

When you can show need for products and services within your newsletter.

The best way of answering this question?

  1. Choose an affiliate product or service that you use, like, and that aligns with your existing subscriber base

  2. Create a test advertisement of the affiliate offer, like this:

  3. Measure the click-through-rate and conversions (how many people buy).

  4. Reach out to sponsors you want to work with and share the click-through rate and conversions on the affiliate offer. Depending on the organization, they’ll either be interested or they won’t.

  5. Most sponsors would be interested in a conversation when you can demonstrate 100 clicks and/or 2-5% conversion on the advertisement. If you’re not at that stage yet, keep focusing on growth before spending time on sponsors!

How should a creator decide on the price of newsletter ads?

The key things to understand about pricing ads are:

  • It’s half art, half science

  • There’s no such thing as a standard sponsorship

  • Pricing is always a negotiation between the newsletter (you) and the sponsor

  • Understanding the goals of the sponsor is key to the negotiation

  • A flat fee is the least risky pricing model for newsletters

  • Cost per acquisition is the most risky pricing model for newsletters

There are four main ways to price ads in your newsletter:

  1. Flat Fee: A flat fee arrangement involves a straightforward agreement where a sponsor pays a predetermined amount for advertising space in your newsletter, irrespective of the number of clicks or conversions generated. For example, if a sponsor agrees to a flat fee of $2,500 for an advertisement spot in your newsletter, you'll receive $2,500 regardless of the engagement metrics.

  2. CPM (Cost Per Mille): CPM denotes the price of 1,000 advertisement impressions on a single page. If your newsletter has a readership of 150,000, and you set a CPM rate of $15, it means you charge $15 for every 1,000 readers reached. To calculate the total cost for a sponsor: 150,000 divided by 1,000 equals 150. Therefore, the total cost would be $15 (CPM) X 150 = $2,250 per sponsorship. In the newsletter world, the CPM is based on your total list size, not total opens.

  3. CPC (Cost Per Click): CPC represents the amount paid by an advertiser every time a reader clicks on their advertisement within your newsletter. For instance, if an advertiser agrees to a CPC of $2 and your newsletter generates 400 clicks on their ad, the total revenue you'd earn is calculated as $2 (CPC) X 400 clicks = $800.

  4. CPA (Cost Per Acquisition): CPA refers to the amount an advertiser is willing to pay for each action or conversion generated through your newsletter, such as app sign-ups or product purchases. Suppose a sponsor agrees to a CPA of $10 for each user you drive to register for their service, and you manage to get 200 sign-ups. In this scenario, you would earn $10 (CPA) X 200 sign-ups = $2,000.

When thinking about these methods, it’s important to realize that a tension exists between newsletters and sponsors.

Newsletters want to get paid irrespective of performance:

  • Flat fee paid upfront (least risky for newsletters)

Sponsors want to get paid based on performance:

  • CPM (2nd least risky)

  • CPC (2nd most risky)

  • CPA (most risky)

Because it’s harder to guarantee the number of opens; let alone clicks; let alone conversions you can drive to a sponsor, these performance models are riskiest for you.

For example:

  • Clicks depend on the sponsors ad copy and overall alignment with your audience in your email

  • Conversions depend on the quality of their landing page and product

These factors are mostly—if not completely—outside your control.

That said, you’re still getting paid. So you’ll need to decide the level of risk you’re willing to take. Clearly, it’s better to use one of these models than to lose a sponsor.

This is especially the case when you’re just starting out and don’t have a track record of performance—hard numbers—to share with potential sponsors.

“I recommend using a combination of CPC and CPM to set your initial ad price. This helps you avoid picking a flat fee out of thin air.”

In reality, you will:

  1. Set it a bit higher or lower

  2. Test demand at the initial price

  3. Adjust as necessary

    1. Raise your pricing if:

      1. You book out 2-3 months in advance

      2. You haven’t had a sponsor try to negotiate for multiple months

    2. Lower your pricing if:

      1. You get minimal interest at the stated price

      2. Sponsors are consistently saying that your pricing is too high

  4. When getting started, respond and be flexible on the methodology (CPC or CPM) depending on the sponsors’ preference

Based on a small sample of newsletters, here are some average CPC’s and CPM’s you can use to find your initial ad prices (keep in mind this is for a main advertisement): 

What are the most critical success factors to turn a partnership into success? In other words, what should newsletter creators pay attention to most while managing sponsorship? 

Once a sponsor has indicated interest, follow these steps:

  1. Set expectations — let them know what happens next:

    1. Team: Who will be involved from your team

    2. Creative: What’s required from them (ad copy, logos, images, and sizes, etc.)

    3. Timelines: When you need creative from them

    4. Legal: Not all sponsors require a contract, but if they do, let them know how these will work

    5. Invoice: Let them know when / how you’ll share the invoice (I recommend Stripe or PayPal billing for the easiest solution).

  1. Understand their goals

Good marketing teams know their numbers cold. This means they’ll have very specific targets in mind for the sponsorship. It’s important to know both current and expected numbers so you know if the advertisement succeeded.

The key numbers are:

  • Cost of customer acquisition (CAC): How much it costs to acquire one customer. The CAC will be equal to:

    The cost of the sponsorship / the number of new customers generated by the sponsorship.

    Ideally, this is lower than or equal to their existing CAC for similar advertisements.

  • Annual Contract Value Or Lifetime Value: This is the value of a customer on an annual or lifetime basis. Comparing Lifetime Value to CAC allows you to understand whether the channel is profitable for them.

  • Marketing Qualified Lead or Cost Per Lead: A lead is an expression of interest in the sponsoring company’s product. In a B2B context, this is typically signing up for a demo or the expression of interest form.

  • Monthly Ad Spend: Knowing how much they spend on advertisements monthly helps you put the significance of your channel in context.

If you know these numbers for the sponsoring company’s current spending, you can work backward to understand what’s required to be successful. For example:

“If your current cost to acquire customers is $10,000 (common for large B2B companies) and the price of this sponsorship is $20,000, we need to get more than two customers for the campaign to be competitive with your other channels.”

3. Follow-up post advertisement

It’s critical to treat sponsors as a partner and as you would a customer. For this reason, following up after you’ve run the advertisement with key metrics is critical.

This is typically over a call for larger contracts (mostly B2B newsletters).

At The Intelligence Age, because we’re dealing with lower contract sizes, we do this over email:

Step 1: After 1 week, share:

  • CPM

  • CPC

  • If sponsor has advertised before, compare to previous advertisement

  • Ask for results on their end

Step 2: After 2 weeks, share:

  • CPM

  • CPC

  • If sponsor has advertised before, compare to previous advertisement

  • Ask for results on their end

Here’s an email template you can use:

“Hey [first name],

Here are the results from the ad we ran on dd-mm-yy:

Total unique clicks:
Total unique opens:
CPC:
CPM:

What were the results on your end?

Cheers,

Alex”

🎢 NEWSLETTER MASTERY COURSE

You’ll launch a course to share your know-how about building a profitable newsletter business.

Can you tell us who should take Newsletter Mastery Course and what they should expect to learn?

This course is suited for:

(1) Beginner Newsletter Operators with no existing newsletter

As far as I’m aware, this course will be the most comprehensive, efficient, and risk-free way for people serious about starting a newsletter to get started

(2) Intermediate Newsletter Operators with up to 5,000 subscribers

You’ll get all the tactics you need to continue scaling and optimizing your workflows, including growth and monetization

(3) Advanced Newsletter Operators with 5,000+ subscribers

  • The main value for advanced operators will be having everything you need in one place and a behind-the-scenes look at how 2 other 50k+ newsletters have been scaled, operated, and monetised. You’ll be able to replicate all the advanced playbooks and templates in your business

  • Further, you’ll get access to an entire paid growth course with Special Guest, Matt McGarry. Matt’s been responsible for driving over 5M subscribers with paid ads for The Hustle, Milk Road, Chartr, Codie Sanchez, Sahil Bloom, Wondermind, Bankless, and 20+ more

No past experience with Newsletters is required; you just need the desire to make a Newsletter a part of your future.

Thank you so much Alex. Can’t wait to see what you’ll share further in the course.

🔗 Where to find Alex Brogan and his work

ICYMI: Previously on Newsletter Circle

*indicates affiliate links

👉 Do you want to reach over 2,000 newsletter creators & enthusiasts?

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