Newsletter Sponsorships
Substack shined a light, if you will, on just how valuable email newsletters could be for building a relationship with a reader. Email newsletters locked in a reader's attention, which is vital to advertisers, and provided a consistent way to identify each subscriber via that subscriber's email address.
Soon, brands that had trouble advertising via Google or Meta started to place "sponsorships" in creator email newsletters, promoting cryptocurrencies, alternative investments, and CBD.
The initial success was significant, and a trend that started with crypto became more mainstream. In 2022, for example, I bought a series of newsletter ads in The Publish Press newsletter for just under $330 per 1,000 opens.
Few, if any, creator email newsletters will garner that sort of revenue per thousand (RPM) in 2024.
LiveIntent Typifies Programmatic
LiveIntent launched in 2009. I don't know what Matt Keiser set out to build when he started the company, but by 2022, when I became much more familiar with it, LiveIntent was already the premiere programmatic email advertising platform.
LiveIntent's customers include some of the largest publishing companies in the United States. But the revenue it generated from email advertising was a long way from the $330 RPMs creator newsletters were enjoying at the time.
Advertisers using the LiveIntent exchange ran targeted campaigns meant to squeeze every possible ounce of revenue from each placement. So, the programmatic RPM for newsletter publishers was more like $3.
Creators Are the Difference
While LiveIntent and The Publish Press existed in the same advertising universe in 2022 —and today— the two advertising options were light years apart.
The newsletter publishers working with LiveIntent are "traditional" media companies. These media companies regarded email newsletter ads as "inventory" in a portfolio that could include printed magazines, video content, and events.
What's more, programmatic is often used as backfill to earn revenue from remnant newsletter ad inventory that was not sold otherwise.
In contrast, the newsletters on Substack, Kit, Letterhead, and Beehiiv are "creator written," meaning the author is typically a newsletter influencer.
When someone opens one of The Wall Street Journal's newsletters, that subscriber interacts with a company. However, when the same subscriber opens James Clear's 3-2-1 Newsletter, he interacts with a person. James Clear is the author of his favorite business book, "Atomic Habits," and a respected productivity guru.
The difference between a company and a person is the difference between email advertising, generally, and the specific industry segment of "creator email newsletters."
As I write this article, this difference is well defined with nearly every content creator who uses Substack, Kit, Letterhead, and Beehiiv belonging to the James Clear type or subcategory of "creator newsletter." But this will change.
Advertising in Creator Newsletters
The creator-newsletter subcategory will itself divide. Leading creators like James Clear, Packy McCormick, Sahil Bloom, Pat Flynn, and similar will move further upmarket, while most newsletter creators shift from sponsorships to programmatic advertising.
To understand why this will happen, consider how creator newsletter sponsorships and ads are sold in July 2024.
- Flat-rate sponsorships. These are the gold standard for creator newsletters. The brand (or sponsor) pays a flat rate per insertion. The newsletter creator usually personalizes the sponsorship copy, effectively endorsing the sponsor's product or service. I helped sell about $4 million of these sponsorships from mid-2022 through July 2024.
- Revenue or cost per click (CPC). Several performance marketing agencies have become active buyers in the creator newsletter space, including Wellput and Media Intercept. CPC ads are often placed via an advertising network. For example, Wellput and Media Intercept have taken turns providing "demand" for the Beehiiv Ad Network. When I led ads at Kit, we also worked with both.
- Revenue per actions (CPA). Many more brands and agencies fund creator newsletter advertising from affiliate marketing budgets. Thus paying creators a revenue share when a subscriber clicks through from a newsletter ad and makes a purchase. Agencies like Magic Rocket and loads of brands are eager to buy this way.
- Programmatic. Paved, Kit, and other ad networks offer programmatic advertising for creator newsletters. As mentioned above, the RPM is relatively low, so creators also tend to use it as backfill right now. Advertisers like it because it works just like other programmatic platforms. They can target or retarget audiences, purchase on a CPM, CPC, or CPA basis, and set daily budgets.
The four ways of selling creator newsletters advertising can be grouped based on targeting.
At present, flat-rate sponsorships, CPC, and CPA ad placements are contextually targeted in creator newsletters, meaning the advertising brand selects the newsletter because of the topic it covers. All subscribers will see the same ad, regardless of how interested they might be individually.
Programmatic advertising targets individual subscribers and cares not at all about which newsletter that subscriber reads. Thus, every subscriber could see a different ad placed via the same kind of real-time auction used for Google Ads and similar platforms.
Programmatic Domination
Donning the prognosticator's hat, programmatic will soon dominate creator newsletter advertising for several reasons.
Programmatic advertising is easy to use. Ad buyers from humble mom-and-pop businesses to the storied halls of a Madison Avenue agency are already familiar with it.
Ad buyers use various demand-side platforms (DSP) to run dozens or even hundreds of audience-targeted campaigns across media as diverse as Google's Search Network and the Disney Channel.
Adding in creator newsletters will be a breeze.
In contrast, creator newsletter sponsorship placements are significantly more complex. Some advertisers have relationships with more than a dozen newsletter creators, each with different requirements, processes, and payment terms.
Programmatic is better for CPC and CPA. In 2024, many, if not most, of the CPC and CPA ads running in creator newsletters are contextual. So, someone on an ad network receives an offer from Babbel, The Flyover, or Upway for $1.25 per click. If that newsletter creator accepts the offer, the ad network will place a single contextual ad shown to every subscriber. But what if half the folks on the list already use Babbel, read The Flyover, and have an electric bike from Upway?
Programmatic advertising can also run CPC and CPA campaigns, but it can target individual subscribers. Babbel, for example, can employ a suppression list so its current users don't see the ad.
Programmatic advertising's ability to target individuals and the most relevant offers should make it relatively more effective, at least in theory.
Programmatic targeting can be very sophisticated. Email service providers (ESPs) know a lot about subscribers. For example, an ESP knows which newsletters someone subscribes to, which links he has clicked, and which devices he uses.
At the time of writing, ESPs are typically data processors in privacy regulation parlance, but if EPSs are reclassified as data controllers, they could possess a powerful identity graph that could be used for retargeting, developing look-a-like audiences, and identifying the relative value of a subscriber to a given advertiser.
Programmatic ads scale. While placing individual sponsorships might work with a few dozen or even a hundred newsletters, it will not scale. Ads must be automatically trafficked to each creator newsletter in an advertising network.
Programmatic ad servers are built to do this.
In any advertiser-publisher relationship, the advertiser is the customer, and the publisher is the service provider. Thus, the most successful service providers will be creator newsletter advertising networks that allow advertisers to buy targeted performance ads with ease at scale.
Upmarket Endorsements
The programmatic fork in the road will be the wide path, and most newsletter creators will eventually follow it. But not everyone.
Some newsletter creators don't need ads. These content creators generate more than enough revenue from digital products, services, or similar offerings. They don't take CPC or CPA offers now, nor will they in the future. For them, the path is toward deep brand relationships with media packages.
Consider the case of Pat Flynn and Smart Passive Income or SPI. Flynn and SPI CEO Matt have built a media company with an active website, a community, a YouTube channel, podcasts, and a creator newsletter called Unstuck that features a weekly message from Flynn.
SPI and similar creator businesses can bundle newsletter placements, YouTube sponsorships, and host-read podcast ads. They can offer brands solid and long-term relationships that last several months, connect with the audience many times, and provide proper endorsements.
Here again, the advertiser is the customer, and the publisher is the service provider, but the service is not transactional. It is relational. The winners will be those creators who can elevate a brand.
Two Paths
The market for creator newsletter advertising will split. The trend has already begun.
Most creators seeking discrete newsletter advertising revenue will ultimately move toward programmatic ad placement through ESP-backed advertising networks, which should be running well in the next five years.
At the same time, integrated content creators will leave individual newsletter sponsorships behind, opting for persistent multi-channel brand partnerships.