The biggest AI newsletters are for sale

👋 Hi friends -

Welcome to The Newsletter Growth Memo. Twice a month, I share short reflections with my newsletter clients + other operators.

Zero formality, ads, or affiliate links - just a guy sharing learnings from working with media operators doing $25-500k+ / month with newsletters.

New reader highlights: Welcome to Tyler Denk (beehiiv), Matt Paulson (MarketBeat), and Rowan Cheung (The Rundown).

Here I was about to email you about using levels of market awareness to improve your copywriting.

And how we’re using it to write ads with <$1 CPLs (with 4-8% CTRs on the ads) for some clients.

But then a bunch of AI newsletter founders decided to start listing themselves for sale.

So instead, let’s look at some numbers + I’ll share a bit about where I think newsletter M&A is going.

Two AI newsletters are selling for $2M+ on acquire.com

Some takeaways:

• The numbers are so big, these could only be The Rundown, The Neuron, AI Tool Report, or Superhuman - your guess is as good as mine

• Not all subscribers are created equal - if these are who I think they are, one is doing $0.10 in monthly rev per reader and the other $0.30-0.40+.

• These margins (85%+) are awesome! But keep in mind the founders have small teams and are operationally still pretty involved in their businesses

So… is 3-4x profit a good price?

I used to run a $15M/year mobile app portfolio.

We were a roll-up and generally paid in the 3-4x EBITDA range for apps.

We expected slower growth than these newsletters do (we were purposely buying in the down-phase after the crazy 2021 revenue run-up for mobile apps).

But apps also have locked-in, recurring revenue - newsletters often do not.

I’m no banker, but this multiple looks right if -

• You’re a newsletter doing <$10M / year.

• You haven’t meaningfully diversified beyond ad revenue

I’m bullish on many more newsletter acquisitions happening over the next few years.

I think this will come from two places….

a) Big media companies
b) Strategic buyers with products/services in the same niche as the newsletter

Let’s talk big media companies first.

Big media companies need newsletters.

Quick story - I went to Charlotte to do a full-day workshop with a company called Red Ventures back in April.

They do billions in revenue between The Points Guy, CNET, and other giant, web-first publishers.

I tagged along as a guest with my buddy Jesse Pujji.

It was cool! Some highlights -

• I shook hands with my first billionaire (Ric Elias - great guy!)

• We sat down with RV’s brand leaders to chat all things paid marketing + hear how publishers doing $100M+ view the world

• We walked them through a case study on one of my favorite newsletter ad teams, 1440 (which the 1440 team was very kind to help with)

I’ll go deeper another time on all of the learnings, but one big takeaway….

Every big media company relying on Google for traffic is a little worried about its core business. 

Google is killing a thing called 3rd party cookies.

I won’t bore you with the details, the TLDR is this -

No cookies = challenges for media businesses who aren’t collecting emails or other ways to ID their audience across the web.

When I was at BCG I spent a lot of time working with F500 media companies on this exact issue.

So… if you’re big media company XYZ, how do you ID your traffic?

Well, you could start a subscription business like the NYTimes.

But that’s pretty hard to pull off.

Why not start/buy a newsletter?

That seems much easier + I think it’s the route many will go.

What about strategic buyers?

More companies are going to begin looking for LTV arbitrage in newsletters.

See, newsletters get a lot more interesting when they’re top of funnel for companies with better unit economics

A newsletter subscriber is worth perhaps $15-20 over his/her lifetime.

But what if they become a $100+ LTV customer?

That’s largely the thesis for:

• Mailchimp buying Courier Media for $10M to reach SMBs

• Hubspot acquiring The Hustle for $27M to reach marketers

• Robinhood buying Chartr and MarketSnacks to reach retail investors

Now, you don’t have to sell to do this - plenty of media companies take a piece of the pie for themselves:

• My buddy Joel does 7-figures selling info products to an email list

• Kevin Espiritu does $3.75M a month in Ecomm off of a gardening blog

• The Points Guy is doing $100M+ with pay-per-purchase deals

So… what should you + these AI newsletters do?

Every sponsor-first newsletter doing $1M+ per year should at least experiment with taking things beyond ads.

For example - someone is going to teach all the digital marketers at F500 company XYZ how to incorporate AI into ad creation, reporting, and consumer research.

And they’re going to do it for $1,000-4,000 per head.

Is it most likely going to be a company like Reforge? Sure.

But why can’t it be one of the AI media companies?

Someone should take a big swing!

Pete/Noah (The Neuron), Rowan (The Rundown), + Zain (Superhuman) all have a massive, once-in-a-lifetime leg up.

Early AI content driving 100k+ organic subscribers and $1 CPLs on paid subscribers won’t happen again for anyone.

For them, I think doubling down is fairly de-risked in the grand scheme of things (certainly vs. starting something from scratch).

Anyway, that’s the letter.

- Nathan May

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