The math behind newsletter growth and monetization

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The math behind newsletter growth and monetization

If you’re reading this, the newsletter boom has reached you.

You’ve probably noticed the sheer number of newsletter ads on social media. Or you’ve felt at some point that you’re subscribed to a few too many (hopefully not this one!). Maybe you’re seeing all the activity and you’re tempted to start a newsletter. Or you’re like us and jumped all the way in.

Whether you’ve noticed it or not, we are living through the latest wave of newsletters. Like every trend, newsletters have followed something of a hype cycle. The big ones we all know - like TheSkimm, The Hustle, and Morning Brew - were all started 8+ years ago. These businesses pioneered the modern newsletter model with little fanfare during the slow growth phase of the cycle. But as the trend picked up and these OG players became big winners, we’ve seen accelerated growth of both readers and writers, new platforms, and new business models. Some articles like this one in Vox published about a year ago try to make the point that newsletters were over - because some well known journalists who dipped their toes into newsletters were going back (a very journalist-centric point of view IMO). But if you look around, I don’t think they were right, and we’re entering into yet another phase of the newsletter era.

Future Founders is most certainly part of this most recent wave. We’ve been writing this newsletter now for about 3 months, and in those 3 months I’ve learned quite a bit about the mechanics that make newsletters work as a business, and what I’ve learned is really exciting. I won’t yet call myself an expert, but as someone who’s recently gone up a steep learning curve, I feel I’m in a good place to share what’s going on behind the scenes.

I’ll also get this out of the way up front: I’m 100% here for all the newsletters and absolutely think just about everyone should have one. Especially if you’re a founder or thinking about starting a business one day. The #1 thing that will make starting a startup easier is to have an audience you can reach with the send of an email. But you won’t build an email list over night… so get started now.

I’m also a big believer in diversifying your income streams and having side hustles, and a newsletter business is a very good one. There’s also very little downside to spending the time to think, curate, and write about topics you’re interested in or working on. The ROI, even if you don’t build an email list or grow a business out of it, is almost certainly positive. You’ll accelerate your learning, you’ll refine your thinking, you’ll grow your network. This is the worst case scenario.

But the upside scenarios are also pretty darn attractive, and the business model that is driving most newsletters today is really interesting.

What I’m going to do is unpack the mechanics of a newsletter business model, and along the way discuss some of the key tactics and strategies behind starting, growing and monetizing a newsletter. Ultimately you’ll see behind the scenes how newsletters can grow so fast (spoiler, it’s paid growth) and how they can sustain that paid growth with very profitable business models.

I also created a template business model that you can download (open the google sheet, make a copy, and start messing around), that shows how all the pieces of a newsletter business come together. You can play around with the assumptions to see how a newsletter business works, and what a newsletter might look like for you.

So let’s dive in.

A short history of newsletters (from my POV)

I don’t have a precise timeline or history of newsletters (I did have to look up several dates for this), but my newsletter consciousness began when I first jumped into venture, back in 2017, with TheSkimm. TheSkimm was founded by two NYC based entrepreneurs Carly Zakin and Danielle Weisberg in 2012, so by the time I heard about it, plenty of others had as well. I wasn’t even the target customer for TheSkimm, but the VC firm I worked at was an investor.

At some point I learned about Morning Brew and The Hustle, two similar and competing newsletters that were launched in 2015 and 2014 (respectively). These two newsletters had a huge influence on the current newsletter boom because of how they ran the business side - namely, neither raised any venture capital, and so when both sold in the last couple years for 8 figures, both were hugely successful exits.

Another huge milestone that really accelerated the newsletter boom was the launch of Substack in 2017 - a dedicated, newsletter first email platform. So while TheSkimm, Morning Brew, The Hustle and others were showing off what the top line of a newsletter business could look like, Substack took the cost and effort to launch a newsletter to near zero, and in doing so became synonymous with a writer or creator launching one of their own.

So now take a look around. Substack wasn’t even the first newsletter focused email platform (Convertkit was launched in 2013), but with Substack, Convertkit, Beehiiv, plus probably a dozen more, it’s now free and very straightforward to set up a top class newsletter. With the proliferation of large newsletters that funneled millions into acquiring subscribers (again, we’ll come back to the business model that enabled all this), millions more people were introduced to newsletters. And now you have platforms like Sparkloop (which was just acquired by Convertkit), Beehiiv and Swapstack which allow even small newsletters to use the same monetization and growth models the big guys have used.

Newsletters are now equal parts art and science

I’ll get to the math that’s driving today’s newsletters in just a second. But first I want to set the stage, because the art - namely compelling, quality content - is still hugely important.

Two of the major reasons to start a newsletter (to refine your thinking, and to engage/network with peers) can only happen if you’re putting in the work to craft good content. Good content is also pretty important for building a business out of your newsletter (although I do think it’s now possible to build something of an arbitrage business without good content).

So how do you craft good content? I’m not a writing instructor, so take what I’m about to say with a grain of salt, but I do have three pieces of advice that should help to frame what goes into your newsletter.

#1 - Treat your newsletter like a product or a startup, and think of the audience as a customer. Your job is to create something that’s valuable, that solves a problem or fulfills a job-to-be-done. You could just write to write, but you probably won’t create the kind of content that will build a meaningful following or business. You could be hyper mercenary about it and look for topics that have lots of interest on platforms like Reddit and Twitter, but don’t have a lot of established newsletters. Or you could find the intersection of your passion and what the market needs or wants.

#2 - All things equal, I’ve seen two types of newsletters succeed. The first is probably the best for business, and that’s the daily (or nearly daily) newsletter that shares curated or aggregated news or resources on a topic. This is The Hustle, TheSkimm, Morning Brew, plus all those AI or crypto newsletters you’ve seen pop up. The other is what we do here - longer form, deeper content that provides content that is original and really doesn’t exist anywhere else. I subscribe to a good number that fall in the middle - weekly newsletters that are curators of links and tweets… and I personally don’t find them that interesting, nor do I see many big ones in that category.

#3 - Last piece of advice, you do need to play in an area that you can stay consistent at. You can’t pick a topic that is complete drudgery to you. Also, I’d suggest picking a style/format that fits for you. I like typing and writing long form content. My brain is full of these ideas that are just waiting to be put on a page, so this is kind of easy for me. Lean into what’s easy for you and you’ll have a much better shot of staying the course.

So before you can start to apply some of the more formulaic mechanics that I’ll unpack next, the journey for every newsletter starts small. You pick a topic or focus or theme. Maybe you workshop the idea with some potential readers, or you’re part of a community and can glean insights from folks like and share already. You pick a platform, pick a name, and start writing.

Like every product, your first version won’t be as good as later versions. And writing or publishing a newsletter is like any creative endeavor, where you’ll get much better and your quality will improve if you stay consistent and put out enough quantity. You’ll also start to get feedback and evolve with the help of your readers. You’ll also find your own groove, and figure out what you like to write and what works best for you.

This will get you started. But now, let’s move onto the math and how you can approach a newsletter formulaically to grow and eventually monetize.

Now to the science

Let’s dive into the mechanics that are driving modern newsletters, what the business looks like behind the scenes, and how they grow and monetize. I’m going to dig into all the details that go into building a newsletter business, so get ready to get into the weeds and see all the way inside this business model.

To help play with all this math, I’ve created a spreadsheet that you can copy and mess around with. I just created this and I’m not a model building wizard, so if you find I’m missing an assumption or don’t have the cleanest model, let me know! I’d love to make it better.

I think the easiest way to talk about the mechanics of a newsletter are to go assumption by assumption, and talk about the tactics that drive each assumption. Let’s dig in.

Starting Subscribers

Start with the actual number of subscribers you have to see exactly how your newsletter will operate. Later you can try out different starting spots to see what growth can look like in different scenarios (maybe you want to buy a newsletter, or see what happens when you get to a certain size).

Organic Growth

Again, if you’ve been writing your newsletter for any amount of time, input the actual organic growth rate. If you haven’t and don’t have a sense for organic growth, start small, because even a number like 5% will start to get really big and unrealistic as the newsletter grows.

I would suggest, when you first start, focusing on organic growth to get your first few hundred subscribers, maybe all the way up to 1,000. This will force you to get creative to build out organic marketing channels, and you’ll be close to the customer/subscriber and able to really learn and iterate. At some point, you’ll likely grow more through paid channels, but all organic growth is essentially free upside.

Organic growth is most impacted by 1) the quality of your content and 2) the amount of hustle and promotion you put into your content. Just writing good content will not get you new subscribers (unless it’s out of this world, magically good). Most likely, you’ll need to share and promote your content far and wide. You can also lean into tactics like newsletter swaps, where you promote a similar newsletter and they promote you to your respective subscriber base.

Monthly Ad Spend and Cost Per New Subscriber

Here’s where we start to get into tactics that have largely driven the latest newsletter boom - paid spend. In this model, I have just two inputs that encapsulate your whole paid strategy - how much you spend, and how much you pay per new subscriber.

When you’re first considering paid growth for your newsletter, there are two channels that I’ve seen most commonly used for paid growth:

#1 - social media ads across Twitter, IG, FB, YouTube. These ads follow just about your standard playbook for social media marketing. You should think about which platform has your audience and where they are most likely to sign up for a newsletter. You set these up and run these like an ad for any other product, and there are plenty of guides for how to do this.

#2 - newsletter referral networks like Sparkloop, Swapstack and Boosts on Beehiiv. These are newer and have been a big hit recently (and act as both a way to grow as well as monetize). But these platforms all operate in the same way: you set a cap for the cost of a new subscriber, and then your newsletter is advertised on other newsletters. If you get a new subscriber, you pay the other newsletter.

Both of these tactics are important, and if you’re just starting out, you’ll probably want to lean into multiple channels to figure out what works best for you. By doing this, you can get your cost per new subscriber down to $1 or $2 - and that’s the basis for your newsletter business.

As you’re trying out different channels, I would start small and ramp up. You’ll want to keep your spend in check as you go to ensure the rest of your metrics - like churn and your monetization strategies, are keeping up. But if/when they are, you can turn on the gas.

Monthly Churn

You won’t be able to avoid unsubscribers. The primary driver of churn is the quality of your newsletter, plain and simple. If you deliver what people are looking for, you’ll keep them for longer.

Churn can kill a newsletter business. The simplest way to think about churn is that churn is capping how much you can earn per subscriber. All things equal, the longer you keep a subscriber, the more you’ll make selling ads and the more profitable they are.

% of new subscribers who sign up for a paid referral and $ per referral

Now we’re moving onto the monetization assumptions, and first up is a new tactic that has been a key piece of the recent newsletter boom. This tactic is actually the other side of the newsletter referral growth strategy - instead paying for subscribers, other newsletters pay you for subscribers you direct to their newsletter.

The way these platforms work is that when someone subscribes to your newsletter, they are then shown a few newsletters they can also sign up for. If someone does, you get credit for driving that referral.

This can earn you the same amount as you pay for a subscriber. But, not all of your new subscribers will sign up for these referrals and get you paid, so this is a percentage. And the amount you earn per referral is often set by the other newsletter, and you opt into certain deals, so the amount you’ll earn will be an average of all the referral deals you sign up to promote.

The only way to move this number is to work with newsletters that are well aligned to the audiences that you’re attracting. Most of the platforms allow you to pick a hand full and rotate them through, so you should be able to learn fairly quickly where to focus.

Number of sends per month

This is pretty straightforward, but ultimately a huge determinant in the profitability of your newsletter.

Like I mentioned above, the two most common newsletter types are daily newsletters that curate news and links - which have the huge added benefit of having an ad to sell every day - and more in depth newsletters that are sent weekly or even less. So depending on your topic and style, you might be a better fit for a certain cadence.

This is where it can be fun to play with the numbers. Changing a newsletter from 4 sends a month to 20 drastically increases the ad revenue (assuming you can sell all the ad slots). Or tinker with sending 2x a week instead of just 1x.

The number of sends also impacts the open rate, and potentially churn. Unless the newsletter is of really high quality, sending daily will have a lower open rate than weekly (people will just skip days even if they don’t intend to churn) and you’ll increase churn as people decide faster if they want this newsletter clogging up their inbox.

Net net, when it comes to monetization, the number of sends is a big one.

Number of ads per send and % of ads that are filled

Related to the number of sends, you can increase your available ad inventory by just having more ads. Many newsletters just have a single ad. And many have multiple and different kinds of ad slots. So there’s no single right way to go about this.

One impact of more ads, all things being equal, is that you’ll lower the quality of your newsletter. Unless the ads are somehow super relevant and/or entertaining. This is the case with all ads, so be wary. You also have to sell the ad inventory to take advantage of more ad slots - so unless you have a backlog of advertisers, fewer is probably better.

But if you can stack more ads per newsletter, and fill them, you can rapidly generate more revenue.

Open rate

Open rates are one of the most important metrics for determining the quality of your newsletter - which is important as you’re starting and growing to know that you’re creating something people want. But it also has a big impact on monetization, because when you sell ads, you sell ads against impressions, and in simplified terms, an open is equal to an impression.

As mentioned before, open rates are affected by the frequency of your email sends, but primarily they’re impacted by the quality of your writing. If people value what you’re creating and want to see it every day, they’ll open your email.

CPM (cost per thousand) per ad

Multiply your email list size by your open rate and you’ll get the number of impressions you’ll serve up for your ads. Then you divide that number by 1,000 to get what’s known as a CPM. That’s the unit that advertisers purchase - basically they’re buying batches of 1,000 impression.

In my experience buying newsletter ads, CPMs range from $50 - $200. The largest determinant of this is the make-up of your audience, and the strength of your brand. If advertising in your newsletter carries with it an implicit endorsement from a trusted or well known source, you can charge a lot. That means, back to the quality of your writing, you want to become that trusted and well known source.

$ for a premium subscription and % of subs who join premium

We’ve now moved on past the ad-driven monetization, and onto the next way many newsletters monetize - with a premium subscription.

A premium subscription is just what it sounds like - a paid subscription that includes extra features. These could include exclusive content, or access to community, or things like live calls and time with you.

We haven’t actually talked at all about the effort that goes into any of this. In the model, I don’t take into account the time and opportunity cost of you writing a newsletter, sharing on social media, managing ads, finding sponsors - and if you run a premium subscription, whatever effort goes into that.

So to decide to go this route, you should 1) understand the cost and effort of what you’ll offer your premium subscribers, and 2) have a sense that your subscribers are indeed looking for more - through high open rates, high click through rates, and other social engagement.

$ for a product you sell and % of subs who buy your product

This final form of monetization is driven by selling something you already make and sell. In this model, I’m not accounting for any of the costs associated with making and selling and delivering that product - so for this exercise, let’s assume it’s a fully set up digital product that you sell.

Like a premium subscription, you should have a strong sense that your audience wants more from you. But if you can get those signals, then you’re in a solid place to sell both digital and physical products.

Monthly platform fees

One of the most attractive parts of a newsletter business is that there are few upfront costs to getting started. Almost all the new newsletter platforms have free tiers to start, and you can get all the features you need from Beehiiv or Convertkit for very little.

When you turn on your paid ads, you might have other tools to pay for, but again most are free to start and not expensive when it gets going.

So tally up all your direct costs here. If you find other costs - let’s say you want to hire a virtual assistant or researcher, you can easily add that into the model.

Putting it all together

So now you can see how a newsletter business works. All the variables need to be designed together, but all things considered, this is a fairly simple business model to pull off.

One way to think about this business model is that the amount of fuel you pour on the fire in terms of ad spend is the ultimate multiplier. So if you build a newsletter that is profitable in its current state (that is, your list size, open rate, # of sends and ad slots, % of ad slots filled, and CPM are all working), then you’re in a very good spot to start turning on paid spend and ramping up.

In practice, the hurdles you have to jump through are:

1. Figure out what you’re going to write

2. Start writing and ensure that it’s good enough to maintain a 40-50% open rate if sending 1x or 2x a week, or 20-25% open rate if sending daily

3. Grow your list (whether paid or organic) to about 5,000 subscribers - which is the point advertisers will start to take you seriously

4. Build out a backlog of advertisers and get to the point where your ad slots are filled up

^ if you get to this point, I would suggest you step on the gas!

And now that you’ve read this, all you have to do is scroll Twitter and you fill find that lots and lots of newsletters have done just that.

Hope this was helpful! See you next time.