Because our TAM is so big, the inch deep, mile wide in a world of the opposite, we can just keep a singular news product and just grow it to become very large. You have to deliver on a product.
I don't care if your strategy is organic. I don't care if your strategy involves paid growth. It does not matter because people will not stick around if your product sucks. [upbeat music] Welcome to "The Rebooting Show."
I'm Brian Morrissey.
A few weeks ago, I had on Rich Rautman from the Sporting News, who said something that resonated with me, and that's that most publishers have no idea what the lifetime value of an audience member is.
And Rich is right, um, and that's kind of insane to people who aren't from the media business.
My guest this week is Tim Holzkamp, the co-founder and CEO of Fourteen40, an email newsletter with three million subscribers that is positioned as a just the facts source of unbiased general news.
Tim comes from private equity, not media, and his approach to the business starts with LTV and unit economics.
We get into what that means, why knowing your LTV is so critical, and why paying for distribution can create a flywheel that creates business stability.
We also talk about the notion of unbiased news and how hard that is to pull off. But be sure to stick around for the LTV talk, 'cause I'm incredibly impressed by what Fourteen40 has accomplished.
I mean, after all, this is a business that joins that club of having over one million dollars per employee. You don't see that a lot with publishing businesses, and so I think it's worth paying attention to.
Before we get to that conversation, a quick message from this week's sponsor, Exco.
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For more information about Exco, visit their website at ex.co. That is E-X dot C... Thank you, Ex.
Uh, they're gonna be sponsoring some bonus episodes of this podcast that will be coming into your feed next week in conjunction with Advertising Week. And as always, I would love your feedback.
My email is brian@therebooting.com, and be sure to rate and review the podcast wherever you get it. Now here's my conversation with Tim. [upbeat music] Tim, thanks so much for, uh, doing this.
Really appreciate you talking to me today. Yeah. Thanks, Brian, so much for the opportunity. Really thrilled to be here on one of my favorite podcasts. Oh, yes. What are the other ones? I'm just kidding. Founders.
I'm just kidding. You don't have to. Okay. All right. No, go ahead. No, actually, I like new podcasts. So what are, what are the other ones? You ever heard of Founders by David Senra? No. Incredible.
He basically reads biographies of all the best founders throughout history, and then just kinda summarizes them for you, like, in an hour.
You get to, like, go deep on Coco Chanel and Buffett and Bezos and Napoleon and all these people and get to learn from them. So- Coco Chanel, Bezos, and Napoleon. That's-- [chuckles] Was Napoleon a founder?
I guess he was a founder. But, you know, it's just the same story as always. It's like Adam Neumann, Napoleon, you always go too far. [laughs] And I don't wanna spoil the end if you haven't gotten through it.
But anyways, let's talk about Fourteen40, and walk me through the founding story and the need that you saw for Fourteen40. Yeah, absolutely.
So I think at its core, the founding story, 'cause Fourteen40 is for busy professionals that were frustrated news consumers, and we weren't folks from the media industry.
So me and my co-founder, Drew's a PhD scientist, uh, worked on Capitol Hill, still there, has a pulse of what's going on on Capitol Hill.
I'm from actually, like, the private equity world, so I spent about a decade at a twenty billion dollar private equity fund where we invested in tech-enabled businesses, essentially like internet and software companies.
And we both had the same problem. We basically felt the media wasn't delivering in two ways. So, like, one, media by design is very niche-y or verticalized, right? So, like, we used to say, like, inch wide, mile deep.
Yeah. So there's, you know, for you to understand what's going on in the world as a busy professional, you kinda gotta go to fifteen or twenty different news sources, right?
Science, politics, sports, culture, business, et cetera, et cetera. And, like, as a busy news professi- as a busy professional, we felt like, man, we don't have a lot of time.
Can someone just kinda bring it all together for us? So that was the first part, basically like a comprehensive source. So that's what Fourteen40 does on the first pain point.
We cover science, technology, sports, culture, business, politics, world affairs. And then we also have fun stuff as well, like Michelin stars and fall foliage schedules.
So it's basically like if you could only have kinda one deep mile wide, uh, publication to know what was going on across all the verticals, [clears throat] that's what we try to deliver. So that's point one.
And then point two is, like, this whole impartial opinions, bias in the news point.
You know, like, as we read content from media indus- media companies we respect tremendously, we felt like often their opinion would sneak their way in the news, or they'd tell you who to vote for, and we're just, you know, we're busy professionals.
We wanna learn what things are. We don't have time to go through that and sift through opinions and bias. Can someone just, like, deliver facts and let us come to our own conclusions?
So with that kinda one-two punch, impartial and comprehensive, we did the whole minimum viable product process, like a good little startup.
You know, we, we MVP'd it by doing it one day a week to seventy-eight friends and family. We had two goals. Basically, have a high open rate.
So, like, at the time, and, like, one of the beauty- beautiful things about the, the newsletter industry is, like, there's a ton of benchmark data.
So we basically said, if we don't have, like, a forty percent open rate- Mm. -and a ten percent weekly organic growth rate, i.e. people like it, and then they're forwarding it to others, let's not spend our time on this.
But after about iterating on it for multiple quarters, we got to, like, a sixty percent daily open rate, which we still have today actually, and the organic growth rate was much higher than ten percent.
So we felt like there was some evidence of product market fit there. People liked it, right? It was still only a couple hundred subscribers.
I believe it went from seventy-eight the first week to ninety-one the second week to one oh four, and we just kinda kept momentum and kept doing then two days a week and three days a week, and just, like, listened to the consumer, which again, is the busy professional who doesn't have a lot of time for, like, thatThe, the one-two punch that we offer.
Fast-forward a few years later, so we now have about three million subscribers. We're at two point nine million right now. We're really proud of like on the impartial side, the impartial value prop side, excuse me.
Mm-hmm. We're really proud that we, we have about a third Democrat, a third Republican, and a third independent readers. It's fifty-fifty male, female.
It's spread almost perfectly across America, and really the only thing it overindexes is education.
So about thirty-five percent of our audience has a mast- a graduate degree versus about ten percent of the United States. We have folks from like the Fortune Ten. We have Fang leaders. We have policymakers.
We have like members of Congress and state supreme court justices. And we like to say it's like it's a psychographic, not a demographic.
And the psychographic is open-minded readers that are busy professionals across the political spectrum who want a lot of information quickly, where they can choose what they wanna learn more about, so... Yeah.
So let's break down w-w-- I wanna get into the growth like in the second part, but like let's break down the sort of product basically. It seems like it, it's, there's two main cores from what you were saying.
One is, call it curation, call it aggregation, we'll get into the differences, but like the idea that you have to go and sift through all these different sources, and so just have like one, and that brings you what y-you need to know.
And the idea, the second half is, and th-this is out there in the ether, I think, but I wanna sort of push on it, is that for a bunch of different reasons, the news has become, I don't wanna say biased.
Like, how would you describe it? That, that it is partisan or opinionated? How do you... Yeah, I think all three. Okay. [chuckles] Right? Like news is... Yeah, all three of those, and not maybe others.
I think news is just such a fragmented market, so depending on who the consumer is, they would answer the, that, your question in like all three of those ways. Yeah.
So if you've, if you're watching, you know, PM news at night, I think they would say it's pretty biased depending on which channel you're watching. So I think it just really depends on, on who the consumer is. Yeah.
So I guess I wonder about this.
I had, I had Isaac Saul on several months ago from Tangle, and we talked a lot about non-partisan news, and I've talked with, you know, a lot of people about non-partisan news, and I think one of the things is, I think a lot of people say they want it.
Like, but give me the... Obviously, you guys have grown quite a bit, but give me the case that it really is what people want. 'Cause I think sometimes, like you go on, like, maybe it's just I'm just talking about myself.
I go on like Twitter, and Twitter is not real life, I hope. And [chuckles] I start to think, "Oh my God, this world is just made up with lunatics." Yeah, I hear you.
I'm a Twitter power user as well, so I know, I know what you're talking about. [chuckles] I know, I'm one of them. This is terrible.
No, but give me the case because like, I mean, ultimately, you know, this always falls down into like everyone claims they want non-partisan, unbiased news.
You know, I talk with my Republican parents about all this time, and they're like, "We just want the facts. That's why we're, you know, watching Fox News all the time." [chuckles] I'm like, "Wait, wait a second."
So I understand that people say that. Nobody's gonna say, "I want biased news." Like, literally nobody. Yeah. But as we know, what people say is often different from what they do. There's a gulf there totally. Yeah.
Yeah, absolutely. Yeah, so the way I'd answer is I think, so I'm with you.
I think people do want biased news on like the far right and the far left, and like I think because the news ecosystem, which again, I'm, I'm still making my way into the media world, and I'm still- Yeah...
learning about it. But yeah, I think at the end of the day it's like it's capitalism, right?
And people are basically providing a, a product that people want and will look at and will read and like will their, give their attention to. And a lot of that is like far left and far right biased news sources.
So like, people wanna hear that. Like, some people we think are like in their bubbles, and they only wanna hear certain things on, it's really on both sides. So I totally agree with you.
I think like a lot of people want that, and they deliver that, and they consume it all day long, and they can listen to it on the radio, and then go to Twitter, and then watch TV, and then watch news sources.
What we think is, like, that the kind of the left and the right is like getting more polarized [chuckles] and what, seventy-four percent of Democrats hate Republicans, and seventy-five percent of Republicans think Democrats are evil.
And th-they're serving that up, but there's kinda this growing, I don't wanna call it the middle, because it's not really like a ri- right left thing.
It's just this growing frustrated news consumer that's like, "I don't care about what you think about, if it's Ted War- Elizabeth Warren or Ted Cruz's op- I just wanna know what's going on in the world.
Can someone just strip out all that stuff and tell me?" Tell me. So that like, it's really like just, it's really more like... 'Cause we respect these media companies, most of them anyway.
And like, they deliver a great service, but again, it's like you're reading an article about abortion and like what are the latest ruling in Oklahoma, and then like all their opinions come in, and then the opinion of some person that's on their side comes in and reinforces that story.
And again, there's, I mean, I think it's causing a lot of polarization in, in the United States. But at the end of the day, it's like people want that, and they've wanted it for a long time, like, what?
Thirty, forty years now. But we just think it's getting so bad that people are like, "I get it. I know you want me to think a certain way. I know there's certain motives, but can someone just... I'm a busy professional.
I'm a doctor in Detroit. I have three kids at home. I wanna know what's going on in the world. I don't have time for all this. Can you just tell me what happened?" Yeah.
And we think that is a massive market, which I'd love to tell you more about. Yeah. We think that's a massive market. Yeah, no, 'cause like I, I hope it is a massive market. But like anytime...
So I think it goes beyond politics. I mean, everything is politics to me.
Like, but, you know, take, uh, for instance, what's going on in the war that's erupted in the Middle East right now between Israel and Gaza, right?
Like, basically, like what I see is people want unbiased, and then they don't want unbiased when it, when it's something that is near and dear. And it, it's different for different constituencies, right?
So like for instance, like "1440," it says that militants and stuff like thisThere's... Go on Twitter, you will get so much incoming fire for not saying that they're terrorists.
And I think, you know, being like well-meaning and playing it down the middle and stuff like this, I just don't even...
I don't know if it's possible because, like, just making a simple choice of using the word militants versus terrorists, maybe it's a vocal minority, but will get you put into the bucket of being biased against Israel.
That's just how it works. Yep. I'm, I'm with you. Like, that's what my inbox looked like this morning. We still get all the feedback from readers, and to your point, we saw it from both sides. I see.
You got, you got it [laughs]. Yeah. I bet you did, 'cause there's no... There's... If you put terrorists, you're gonna get a different set of emails, but I don't even know how you don't get the flood of emails.
Maybe switch on and off. I don't know. Well, yeah, we, we, we have a standard that we work for.
But yeah, I think it's, to your point, though, a, a lot of folks want that, and then a lot of folks are sick of it, and we think there's a growing audience of folks that are sick of it.
And like, you know, I, I hate to say, but proof's in the pudding, like, we have three million Americans reading it every day. Yeah. And it's a third Democrat, a third Republican, a third independent.
So we've had some, like, testimonials written in, someone on the, on like, you know, the left. "I listen to NPR for an hour on the, on the car ride in every morning.
I read The New York Times cover to cover, and I watch Rachel Maddow at night, but it feels like I'm missing something, so I love reading 1440." Yeah. So how do you productize that?
'Cause I'm always interested in people who come into the news business from outside the news business.
I mean, 'cause I, I wrote this morning, before this conversation, about old playbooks, and I feel like the media landscape has completely changed.
Yet at the same time, just like the NFL has changed, I use this analogy- Belichick. I read it. Belichick. Okay, good. I appreciate that. [laughs] I mean, I was watching football yesterday, so you get ideas wherever.
Uh, I, I try to repurpose. But no, it's something I've been thinking about a lot 'cause I think about playbooks, and I think a lot of times, I think there's obviously...
I've been in this business for a little while, so I of course value experience. But at the same time, I recognize that there's a lot of things that are done just because people have one playbook.
And when the media landscape shifts, you know, you probably need a new playbook.
And, you know, so coming from the outside, I think it's interesting 'cause you're probably not as tied to a lot of the conventions that existed before.
But my question is, like, how do you end up productizing that, right?
Like, because, like, in, in journalistic organizations, like, there, it's, like, always getting, it's always getting caught up in a lot of these J school, um, debates and stuff about both sides ism, what about ism and, and stuff like this, and proportionality versus, you know, uh, if s- and if someone says that the sky is green, you can't actually give them the same credence as if someone says the sky is blue.
Obviously, not with that, but with different issues, you know, like, I don't know, Trump losing the election. How do you productize that approach? Yeah. I think it really goes back to, like, that one-two punch, right?
So just half of it is the impartial angle. So again, like, we think that there's a fif- 50 to 100 million Americans who are sick of all the opinions and the bias and just wanna know what's happening.
So that's part of it. The other part is, like, the comprehensive angle as well. So, like, that one-two punch for us is, like, is essentially why we win.
You know, like, I, I don't know about you, we- we're probably not the best, the best examples 'cause our, our backgrounds, but I get 20 or 30 newsletters every day. Like, I love them, right?
So basically, like, when we look at it from a comprehensive perspective, it's... We s- try to think like, okay, using me and Drew as an example,
I read, I go deep on finance and business and private equity and venture capital and crypto and all these things, right? So I'd read, like, Fortune Term Sheet and Dan Primack, act- I'd go, go deep on the finance stuff.
But, like, Drew, my co-founder, who's reads Punch, Punchbowl every day and Politico and all, like, the insider DC stuff, but he's not, like, he do- he doesn't know what's going on in business and sports and everything else.
So, like, he comes to 1440 because he's gonna go deep on politics with, like, other sources and other places, but then he relies on 1440 to provide all the other stuff. Mm-hmm.
So basically, again, I think it goes back to, like, that one-two punch. Like, there's a huge audience that wants to just talk about facts and, like, not have opinions and motives and all that.
And then the second part of it is, like, really, like, our comprehensive angle where because we cover so much and because our audience, not everyone, to your point, like, we lose subscri- we lose some subscribers, but they know, like, we're working really hard to just deliver the facts and deliver, like, without motives.
Yeah. Like, we're not trying to get you to think a certain way or vote a certain way because, like, we're just trying to learn at the end of the day, and I think, like, it's because we don't... Maybe that's our fault.
The, we, we come from- Yeah... we didn't come from the media industry, but we're just, like, hungry, intellectually curious people that wanna know what's going on in the world, and, like, we built that product.
And when we started, people said, "No one will want that. Doesn't make any sense. Comprehensive doesn't work. You need to be niche-y and verticalized. Doesn't work in media.
And unbiased, you can't do it 'cause no one wants it." But we like to say proof's in the pudding.
We have three million Americans, and we're just getting going, and we think it's a massive market that wants that comprehensive, impartial one-two punch. Yeah.
And I think that's the other part is you're in basically general news. I mean, you cover a lot of different topics, right? And, like, I'm, I have a lot of people on here, and I'm...
my own, like, sort of bias is more towards the niche side, and I think it's difficult to pull off the general news angle with original reporting, right?
And I think you can cover a ton of ground with aggregation/curation, whatever you wanna call it. So tell me about that, because there's a long history.
I, I think back to BI, you know, Business Insider, which apparently they're going, they're considering changing it back to Business Insider from Insider, which, like, I've been advocating for from the start.
I never switched to Insider, so I'm glad I could possibly be waiting them out- Yeah... until they right that wrong and just make it Business Insider.
But BI started in aggressive aggregation, and then they flipped the switch into original reporting. We see this all the time. Tell me about how you think about that, because I think, like, a lot of...
that's the old playbook to me. That's like, okay, yeah, that's standard playbook.
Yeah, you start with aggregation, and then you move into original.Can I walk you through our current business model first to answer that question? Oh, yeah.
'Cause I think it's helpful to set the stage 'cause I would love to get into that, but I think it's important to- Hardly anyone ever says that to me, but yes.
[laughs] Yeah, so, you know, okay, so I think, yeah, to your point, like, we try to think things about like think about things slightly differently. So for instance, how our business model works, right?
We have, uh, almost three million subscribers now. At the end of the day in the, in, in the newsletter space, which that's our current product is only a newsletter, right? That's what we offer right now.
I'd love to tell you more about why we've thought through that. Yeah. But at the end of the day, the way we...
you win is basically delivering a world-class product that has a high open rate and a high retention rate, right? This is a unit economics business. If you don't have a high lifetime value, the math doesn't work.
I talk to founders all the time where they come in and they say, "I got ten thousand subscribers. I got a twenty-three percent open rate. Can you show me how to monetize?"
And it's like, "Hey, man, your business isn't gonna work." Like, you gotta go back to the drawing board, like the, the, the math doesn't work on that business. Yeah.
You need, you need rich lifetime value for this model to work. Yeah. Right? So when we were really small, we started -- after we had evidence of product market fit, we immediately focused on the business model.
So basically, how do we build a flywheel business model with strong unit economics? So what does that mean, right? Like, obviously, I know y- what unit [chuckles] economics means, but so- Yeah...
you know, we have -- we basically, we sell placements. Our business is pretty simple at the moment. We curate with editors and writers all the best news and information on all the topics.
We sell ad placements to our wonderful partners who wanna get in front of our, our audience that has a high household income and likes to buy things, and then we take that money, and then we re- reinvest it back into growth.
Yeah. So, like, some of the, the, the math behind it, right? So basically, at a super high level, every time someone opens an email, it's worth about five cents to us, and then we send about twenty-five emails a month.
We have a sixty percent open rate, which we believe is one of the highest or the highest in the space.
We have world-class retention as well, so people -- about half the people that open -- that join our list stick around forever. It's even higher of people that opened one email, so we're just trying to get them to one...
open one email. But anyway, it's, it's about fifty percent. So we have this nice little unit economics business where we make five cents an open, right?
Obviously, the, the reader has to click on the ads and be engaged with them, or the, the advertisers don't, don't come back. But to keep it simple, it's five cents an open. We send twenty-five newsletters a month about.
We have sixty percent open rate. You know, fifteen opens is seventy-five cents a month in life- in lifetime value for the month, and then we can acquire customers for, like, three to four bucks.
So, you know, typically venture capitalists are looking for unit economic paybacks, LTV over CAC of, like, multi-year of three to one.
Ours is well above that, and we basically just focus on that and do everything we can to increase our unit economics because we believe as we get bigger, we have -- we can eventually, which I'd love to talk about next- Yeah...
take it from here. Once you have a profitable business, you know, you control your own destiny, and you can kinda d- not be, like, on the, the VC- Yeah, yeah. I know... hamster wheel going with that, but right? So yeah.
So like, that's what we focus on. Unit economics, we have fourteen employees. We do over a million in revenue per employee.
We have this little metric I'd love your take on called EBITDAG, which is basically EBITDA plus growth, right?
So like, essentially, if you add back the growth, which is all variable, our margin is, like, in the seventies because we have a lean and mean- So wait. Walk me through EBITDAG. I like EB- [chuckles] EBITDAG. Right.
It sounds Dutch. Yeah, sure. [chuckles] You know? Dag is Dutch for day. Yeah. [chuckles] I used to live in Belgium, and every Tuesday was, it was, like, dinsdag, which is Tuesday in Dutch.
Dinsdag is hamburger dag at McDonald's. So EBITDAG reminds me of that.
[gentle music] Walk me through EBITDAG again, uh, 'cause I like this.
Yeah. So it's essentially if you add back growth, right? Okay. So you have fixed costs in the business, and then you have variable costs that go into, like, the unit economics calculation.
And we would never do this, but if you just turned off growth altogether, what's your EBITDAG margin? Okay. [chuckles] Right? So. Okay. Good. Which is- But it's, it's actually not, right? Yeah, yeah.
[chuckles] No, well, theirs was community-adjusted growth. That was complete bullshit, but I honor Adam Neumann for trying to pull it off, though. And look, if WeWork keeps falling, I see a comeback.
CJ Gustafson, who has been on this podcast, had suggested this on Twitter the other day.
But it's interesting because I think the way you build this type of media business is very different because, like, growth, we're, we're talking about, like, you know, paid growth is core to the business, right?
And I feel like in past media, yeah, there was a lot of paid distribution, and now, you know, people didn't talk about it or something, or they denied it and, and whatnot. Yeah.
And now it's like, look, this is just the smart way because otherwise you just don't control your distribution, and I... it's really difficult to have a sustainable media business with really up and down distribution.
And we saw this during the viral era where, you know, a company like Funny or Die or something, you can't build a media business around, like, you know, twenty million visitors one day and, like, you know, ten thousand the next.
It just... It doesn't... It, it... You just can't do it. So talk to me about how the paid growth aspect, because, like, I was, like, doing some quick math.
I mean, you said five cents per open, and if you have three million times sixty times five cents, what is that? It's, like, twenty-five hundred dollars a, a issue? No, it's twenty-five thousand?
You gotta check your math, Brian. Little higher than that. Yeah. I was doing it [chuckles] through Google. What is it then? What I- Yeah, it's, um... Ah, I love that...
It's between fifty and a hundred thousand dollars a day. Okay. Yeah. So, so you-- So how much of that then do you reinvest in growth? Because you're not paying that to create it, [chuckles] obviously.
There's overhead costs. Yeah. So that's the EBITDAG me- Okay... margin that I looked at, right? So about seventy-five percent of that...
Sorry, our, if you take out the growth, we have a seventy-five percent EBITDAG margin, and then we reinvest almost all of it back into growth. Oh, wow. So you, you guysYou spent a lot on growth. Yeah. Yeah.
To your point, I think, like, I don't know, and maybe it just comes down to- I don't wanna say this is like a dirty secret, but I feel like, you know- No, I agree... it was always glossed over in the Morning Brew story.
And like, I'm sorry if- Oh, I agree... Austin's listening here. I, I... there's nothing wrong with it, and I don't...
Like, I, I think the part that I don't really understand is when people play pretend about, like, "Oh, we found this referral model."
It's like, no, you bought a bunch of Facebook ads and Instagram ads when they were cheap, and, like, good on you for finding a dist- distribution seam. This is, like...
I think now it's different, where it's not finding the seam. It's about making it a integral part to the business model. Yeah, I agree. They're... It's kind of like a... It's, like, looked down upon for some reason.
Again, I'm not from the media industry, so I don't totally understand it.
But, like, you know, in the private equity world, they call this, like, a flywheel business model that's beautiful, and that's what, like, you're, you would, you, like, try to work for.
To your point, about a third of our new subscribers are some sort of organic word-of-mouth referral, so people are still forwarding it out. But yeah, we love the paid model.
Most sophisticated businesses in the world think about unit economics and the paid model as well, right? Like, they're all of our customers, they're all the folks investing on Google and Facebook.
Like, they're just trying to k- have rich unit economics, and that's, that's how most, [chuckles] that's how most companies operate.
I understand why to some people it's, like, better to have, you know, 100% word of mouth. I, I'm, I'm biased here, but I think it's really a strong business model to figure out how to create- Yeah...
[chuckles] create a flywheel with incredible unit economics and then just, like, let the thing spin, which we've been doing since we started, right?
We've grown our revenues every quarter since we started, so because of that, our EBITDA number increases, and then we have more budget to essentially invest in more growth.
So, like, that's why we're getting up to three million subscribers now. Yeah. And because of that, you can be, like, a lean and mean company, right? Where basically you're not always focused on, you know...
Yeah, you're focused on, like, what matters and how to drive profits and how to reinvest them. And yeah- Yeah... getting to that profitability was, like, super important for us.
And, and newsletters, this works really well. It, it has worked really well with newsletters because there are a lot of different growth levers. I mean, like, you know, they go away, but, like, it would be...
I guess it would be harder to, to pull this off if you had a website business, right?
If you were trying to get people to a webpage and you were gonna monetize through display ads, and you were gonna have header bidding jacked up and programmatic, and it would seem like that would not make as much sense for this product and this business, really.
Yeah. Ab- absolutely. Couldn't agree more. Like, we don't see white space in creating a newsroom and doing all the, you know, on-site stuff.
Obviously, some people have done that really well, and, like, we really look up to them and they're incredible and, like, kudos to them. But yeah, we don't see white space there from a business model perspective.
And also going back to, like, our original value proposition is we think that there's...
there are so many wonderful writers and creators that are creating e- excellent content all over the world in all these different topics. We think the problem is not there needs to be more of them.
We think the learner that wants to know those topics and dive deeper and learn more is not being matched with a content creator, so that's why we're leaning into curation. Like, again, like, yeah, we like...
obviously, like, we, we unbiased, impartial, like user- I mean, there's also cost advantages [chuckles] here. You and your EBITDA would go down if you had to hire reporters to cover every single- Well, absolutely...
one of those categories, right? Ab- absolutely. Absolutely. Yeah, absolutely. I mean, I know. I just remember, like, Henry Blodget used to show this slide, or at least he did at one event I was in.
I don't remember what it was. And basically it was like, we're gonna, we're gonna create this stuff way cheaper than, like, The New York Times or The Wall Street Journal can.
And, like, the, you know, the reality of the ad business is that you need to get your costs down, and what are your biggest, like, costs of creation? It's in the people.
So, like, if you can have fewer people and not people that have to go out and, like, spend all day on one piece or probably multiple days, then, you know, your unit economics get better.
I think the question ends up being is, and this again is the old sort of way of thinking maybe, is that can only get you so far in that if you're gonna build a quote unquote "real brand," you're gonna have to go into original.
I mean, you see Morning Brew. Morning Brew is, was running a similar model, you know, and now they're more original reporting than they've ever been. They also- Yep... the costs have gone way up, by the way. Yep.
No, we've been following along. Yeah, totally hear the point. We think as intellectually curious people ourselves- Yeah...
totally with you, totally agree with you on all the, the cost side and the writers are very expensive and on-the-ground reporters are very expensive. Totally get it. We just don't think that's the problem.
Again, we think the problem is there's all these incredible writers in the world and all this incredible content and it's not being matched, and, like, that's where we can add value to the user. Yeah, yeah.
Who we're leaning into. And- But you're also avoiding the cost, right? 'Cause someone has to pay- Yeah, that's right. Yeah... to go and report on what's going on in Gaza, right?
And, like, it's easier to aggregate or curate, whatever we wanna call it, than it is to be paying for the fixers, paying for the security, paying for all that.
I mean, it was, you know, the infamous Baghdad Bureau problem that The Times had before they w- went to a subscription model, was that the, an ad-funded business simply could not support the kind of ambitious reporting that The Times wanted to do as part of its mission.
Yep. Understood. Yeah. So that's why we don't think we can win there. We don't like to... Like, why would we do that, right? We have a value prop. Yeah. People are hungry for it. We're- we could...
I, I could make the argument we're the best in the world at curation, and, like, that's what we're gonna lean into and keep delivering that for our customers.
So I- I totally with you, it's, like, not the best business model to go over there, so like why- Yeah... so that's, that's what we struggle with is, like, why do it?
And that's why, oh, by the way, like, we have one singular product. Just don't see that path for us because we have a different value prop. Right. And we don't think that's the white space.
Also, I would take the position that our TAM is much larger than a lot of these folks. So as an example, political insider stuff, right?
Obviously you get huge CPMs there because they're lobbying Congress and, right, like you have all- Yeah... the, the, you know- The Punchbowl model. It's great. Yeah. No, it's an incredible business model. Awesome. Kudos.
But, like, how many people can read Punchbowl at the end of the day?Actually, I love your take on that. [chuckles] I'll get Jake on. Jake will be like, say way more. You know, I mean- A half a million...
with the existing product, it's narrow.
And I think there's a lot of, you know, narrow, incredibly profitable type of businesses as long as you're going after a category that the platforms can't serve and that is incredibly valuable, such as legislators, regulators, et-et cetera.
I think you could see expanding it into like a state level and that kind of thing, and just really moving up the chain of like power brokers, right? And I think a lot of people are going after the power broker market.
Like, if you are a rich and powerful person, I think Jay Rosen had said this on this podcast, you will always be well-served by media. Like, it's not a concern. You'll be well-served because you're incredibly valuable.
I just... From a TAM perspective, and obviously, again, the CPMs are way higher, the revenues are much bigger.
But from a TAM perspective, the average person, what we found, again, this is because we're not in the industry, I think, this is what our thesis is. And again, love your take- Yeah... 'cause we're wrong all the time.
A doctor in Detroit or a lawyer in Louisiana or consultants at BCG, they don't care about... Most of them- Yeah... don't care about that stuff, right? Again, Drew cares about it- Hundred percent...
'cause he's a political- Hundred percent. And he's goes, he goes in, and I go deep on finance and PE and Dan Primack and, and Fortune Term Sheet. But, like, those markets are only so big.
So, like, we believe that if you let everyone else go deep in their niches of what they're passionate about or they're professional, but you could still cover everything else, and that's a very large TAM. Yeah.
That's been our point all along. So it's like, let these wonderful people that write deep insights on what's going in Washington, let them do that.
But, like, again, the, the, the pain point for, for the average consumer, I think it's like ninety percent of consumers in America is like, "Cool, I have information overload. I don't wanna go that deep on that thing.
I want a surface level overview of thirty to forty links that covers everything, that puts them s- on a silver platter where I can choose what I wanna learn more about, and then dive deeper." Yeah.
We think that's the big white space. The, the risk is the in between, right? Like, 'cause I mean, when you talk about like... Yeah, you have a, an incredible business. A-and still, I would make ten X per open.
I just have far fewer opens, so I have to. So I think it was just like, you gotta pick a lane, and, like, you know, the lane is, you know, you have a bigger TAM, but you're gonna have a lower LTV.
I mean, I run into this honestly in my own, like, sponsorships, in that the sponsor has to have a, an incredibly high LTV for it to make sense, you know? Sure.
Because, like, I just don't have enough Ms, and I would have to... Maybe what I'm doing is not good enough. But, like, I just simply do not have the eyeballs to work with a Masterworks or something.
Because it's just a different model, whereas you could probably make, like, a Masterworks campaign work for you. I couldn't. Yeah, we do it once a month for them. We make it work. There you go. Yeah. See.
[laughs] I don't know why I chose Masterworks, but I think they're a sort of prototypical newsletter advertiser. I, I think we have also seen newsletters be a sort of training wheels media product, right?
And by that, I don't mean that i-in a negative way as a newsletterer myself. You can spin up a newsletter without, like, dealing with a lot of, you know, the tech infrastructure. You don't have to- Absolutely...
like, wait for SEO and all this stuff like this. You... There's so many advantages to it. But there are disadvantages, and that would be my fellow, this other podcast I do, People Vs.
Algorithm, Troy Young would, would call it a lack of surface area, which I believe it translates into, there aren't enough spot, places to put ads.
I mean that you have a lower ceiling when it comes to a newsletter, and what are your levers? Your levers are send more. You can acquire more, obviously. You can send more. You can break it into high value niches.
I've seen this being done where you have like a generalist newsletter and then like TLDR, for instance.
You have a generalist newsletter that has like a higher TAM, a lower LTV, but then you can try to break it into, and in, and s- in many ways, Morning Brew did this. You can break it into high value niches.
For Morning Brew, they went into B2B, whereas, I don't know, maybe Austin can come back on the podcast and tell me what the average revenue per open is like a Marketing Brew versus just the regular flagship Morning Brew product.
It's significantly higher. And there's just different ways, but, like, how do you end up thinking about that? Because you're good at what you're doing, right?
But then we've always seen this, like, you gotta master something new, or do you think that you don't have to do that? No, yeah, of course, you gotta be thinking about new things. But yeah, to, to...
Back to the other point, though, yeah. So I think the B2B newsletters, from everything we've seen, they get about twice, two X the kinda consumer-focused newsletters.
Again, though, I think you get pretty, pretty small there, though, right? So like HR professionals or- Oh, yeah... marketing professionals, it's pretty small. So our thing has been like- Yeah...
because our TAM is so large with that one-two punch of impartial comprehensive, I think, like, if you're like a millennial finance newsletter, like you hit the TAM pretty quick, right? Like how many were there?
Eight to ten million? I'm making up these numbers. Yeah. Eight to ten million of those folks in, in, in America.
And again, like with private equity in-individuals in Wall Street, there's a couple hundred thousand, and in insider DC people, there's a couple hundred thousand. Mm.
So our thing has been basically with those businesses, and again, they're terrific companies and we look up to m- all of them, but they basically, they hit their TAM, so they gotta expand out.
We think we have the luxury of doing the opposite. Because our TAM is so big, the inch deep, mile wide in a world of the opposite, we can just keep a singular news product and just grow it to become very large. Yeah.
So you wanna stick with your main product. Because, look, there are a lot of advantages to that.
Like, I think the, one of the big lessons from the last year is a lot of companies tried to do too many things at once, and they were- Yeah... scattered, to be honest with you.
They just would chase any sort of pot of potential revenue that was out there, a potential audience that they could pretend was theirs but was really a platform's, et cetera.
And there wasn't enough discipline in being like, "We're good at this, and we're gonna keep doing this." Again, just to go back to BI, it's like, "We're good at this. We're actually really good at this."
And insteadIt was like that meme. What is that? The distracted boyfriend meme. You know, they see like platform video views and [laughs] they're like, "Hey, what's that?" But how...
So y-you think you'll stick with the TAM is big enough here that, like, this newsletter and just, like, triple down on this? Yeah. So to...
In short, yes, we think the TAM is very large, and we think there's incredible benefits to being focused and only building products and launching new products where you're unique and you can win. Yeah. Right?
And again, like, we're not gonna go try to build a newsroom or anything like that 'cause that's not gonna end well for us. And also, the customer doesn't need that.
Like, there's res-respectfully to the folks at Building, like, there... I think there's too much. The, the customer needs the curation side. So anyway, so we only- Yeah... focus on areas where we can win.
I think also, like, so in the near term, what does that mean? It means we have three million subscribers letting our flywheel spin, right? Like, our growth budgets get bigger every month.
So, like, as the EBITDA falls down and we can grow faster and eat into our TAN even more. I don't know, uh, you... People still don't know who we are.
We're like, we have three million subscribers, and largely, people don't know who we are. So I think we have a long way to go there.
And then the, the other near-term action item we're to go out and grow the revenues is we want to expand on the advertiser side. So basically, as I said, our audience overindexes education and household income.
Thirty-five percent has a graduate degree, and we have fortune leaders and Fang and all that. However, we also have that third to third Democrat, Republican, Independent. Mm-hmm.
They're all across the country, and we basically think that we're unique and different in that way, where you can go get a different audience that's maybe, like, a little bit more de-duplicated, and that's our next near-term goal.
We have a long-term goal as well.
Our near-term goal is a combination, grow the list, grow the audience, expand into the TAM, and then also expand the advertisers by letting them know about what our audience actually is and how it can serve them. Yeah.
So right now, your advertiser base is mostly newsletter advertisers. I don't mean it, like, in a bad way- Yeah, it's-... but you're not, like, on the agency treadmill exactly. Like, a lot of direct deals. Yeah, it's...
So it's a lot of, yeah, it's financial and consumer goods companies that wanna get in front of our affluent audience. Yeah. Yeah, like we're...
The ultimate goal is to get in front of the big players in the space that do, like, the advocacy ads and all that. So that's what we're trying to work on next year. Yeah.
And I think that ends up being the challenge 'cause, like, media is like, there's a large dollop of optics in media, and, like, it sounds ridiculous, right?
But, like, you know, going to an agency, it's a problem if they haven't heard of Fourteen40.
You can show them all of the data and, and everything about, like, how big it is and your demo and stuff like this, but there is a premium placed on the kind of cachet that I think leads people more down to the original content lane.
You know, because it's obviously very expensive and it's inefficient, right? But, like, it gives you more perceived heft, I, I think, in the market, for sure. Yeah, I, I think that's right.
I think also we made the strategic decision when we were small to grow like a mushroom in the dark, right? Kind of be fly under the radar. Yeah.
I think just as a former investor, I saw a lot of companies that kind of the, did the sizzly launch and then, you know, had all this talk and then didn't focus on their product and didn't figure out their business model and their unit economics, and then they blow up in a year, right?
So, like, we always took the approach that let's build a durable business that's profitable, where we have a flywheel model where, you know, we can focus on this thing for the next fifty years. Let's get there.
We control our own destiny, and then we'll have this high-class problem of like, you know, no one knows about us. Now we gotta get people to know about us. But behind it, we'll have three million readers. Yeah.
Totally get that. So talk to me about the growth, because I don't think, you know, we got into like the LTV and stuff, like... So how do you figure out, like, first of all, what is the LTV of a subscriber to Fourteen40?
Yeah. So it's about seventy-five cents a month. Okay. So you can kinda do, do the math from that, right? [chuckles] Okay. So what is your payback period?
'Cause I think a lot of times when people, now, like we've gotten comfortable with talking about paid growth when it comes to media- [laughs]... because it's part of media, and that's good. I like- Right.
We'll talk about this afterward. I feel we've made, we've made progress with normalizing the fact that, you know, it's not, quote-unquote, only losers pay for it. Like, [chuckles] you know?
No, seriously, that was, like, a big, like, you know, problem and, and, like, it was... And I think some of that is, you know, I think Sean Griffey has talked about it.
He's accused me of this, of, you know, it being like some sort of dirty secret or something like this that people, God forbid, pay to market their product to, to consumers [laughs] who don't know about it, which must seem very strange for you coming into this business.
[upbeat music] But it's very important to understand the LTV before you go into paid growth, because otherwise you're just like, I don't know, you're playing darts in the dark, and that's how you get hurt, and understanding what the payback period is.
But talk me and then others in it who are less well-versed through the math that goes into a high-performing growth program. Yeah, absolutely. So again, I said this earlier, but it's so paramount.
If you do not have a product that people love and opens at a high rate and retain at a high rate, none of this matters. Yeah.
So, like, that's first and foremost, like, we have a product people love, and it's growing, and that, that's what makes your economics work.
But to kind of reiterate some of the numbers I said earlier, yeah, we make about a nickel every time someone opens an email, right? So, like, opens matter because advertisers want people actually seeing their ads.
So we make a nickel every time someone opens. There's about twenty-five send opportunities a month.
We have a sixty percent open rate, so twenty-five times sixty is fifteen times five cents is about seventy-five cents per active subscriber. So then there's a, as I said earlier, there's like a retention rate to that.
About half of them stick around forever. We see about, in the first quarter, it comes down and then flattens, so people are kinda feeling us out.
Some people, like, think we're far right, and some people think we're far left and unsubscribe. That's fine. We think that middle per discussions is very large.
So basically, we're making, call it seventy-five cents a user per month on the LTV. That goes for multiyears. If you go back to our first cohort of users from twenty eighteen, again, half of them are still around.
So when you think about it as a cohort, they're just, they're spitting out cash every month, and then we take that cash and reinvest it with our flywheel business model back into growth.
How do we do that?We basically are just incredibly focused on, again, the unit economics and the quality of the user and how much they're actually opening the email and clicking on emails. So it's been amazing learning.
We have different sources. If you talk to all the other folks in our space, right, they're looking at, like, where do I get the best returns on my spend, right? On my ROI-- for ROI.
So largely, we do it between Facebook and Instagram ads, Google ads, other newsletter ads.
If actually there was only one source we could do, it would be other newsletter ads because the quality of them is, call it double- Yeah... of a paid social ad. Well, well- 'Cause like PR-... people who read newsletters.
I mean, it's like- It's self-spent... sort of as simple as, as that. [chuckles] It's like- Yeah... people who listen to podcasts, people who read newsletters. I mean, I, I saw your ad.
I didn't click, so it didn't, it didn't cost you anything in Semaphore last night, so. Nice. Yeah. Yeah. So, you know, we just have-- we have our budget.
Again, like, it's pretty large 'cause it's seventy-five percent-- almost seventy-five percent of our revenues- Yeah...
and we're just constantly reinvesting it back into growth to let the flywheel spin and- So what can you pay? Like, more than, like, three dollars or like what?
'Cause I think- It, it's about three to four dollars for a subscriber, yeah, right now. It was after iOS fifteen back in, what was that? Jul-July of twenty twenty-one.
The whole ad market went crazy, and CPMs went up, and CPAs went up. But they've since come down. But yeah, we pay about, call it three or four dollars per subscriber.
That's blended when you include all the different sources and the channels. And every month, we're just looking at... Not a month. On a near weekly basis, we're just looking at where's the best returns?
Like, where can we get our audience? Where are they? Like, as an example, Twitter. Yeah. Twitter, for whatever reason, two year... Up until about a year ago, you just didn't advertise on Twitter.
It never worked for a lot, not only newsletters, but I would say, like, anyone in, like, the direct consumer space. Yeah. Just didn't work. And then in Q4, something changed.
We think, well, I don't know why, but something changed where actually, like, it worked again. So we leaned into Twitter for probably three quarters, I would say.
Of late, it's been back to, like, meh, so we're pulling back spend.
But every day, every week on our weekly call, we're just looking at, okay, you got Facebook, Instagram, Google, TikTok, Reddit, Quora, Pinterest, you know, other newsletters. Where are we getting the best returns?
Where is our audience, and how do we [chuckles] acquire that customer at the best rate? Because again, it just compou- what-- Warren Buffett said eight-- compounding interest is the eighth wonder of the world, right?
Yeah. You get your CPA down twenty percent, not only do you... So that, that also means your subscribers you acquired that month jumps by, was it twenty-five percent, right?
So, like, instead of getting two hundred thousand that month, you get two fifty. And then again, fifty percent of them stick around, so you just monetize them hopefully forever if you deliver them a world-class product.
Yeah. Right? You gotta keep doing that. You have to deliver on a product. I don't care if your strategy is organic. I don't care if your strategy involves paid growth.
It does not matter because people will not stick around if your product sucks.
Doesn't matter what your distribution strategy is, and I think that there are tremendous advantages to having a paid growth strategy, you know?
Doesn't mean that, like, you know, there's no organic connection to the product, but, you know, this is pretty standard. Think about the DTC world.
I mean, it, it wasn't as if anyone was starting a, a DTC e-commerce company and was like, "You know, we're not gonna pay for any ads." [chuckles] You know what? The people would be like, "What are you talking about?
You're the three hundred and thirtieth, like, bikini company in-- on Instagram." [laughs] "Like, you better." [chuckles] Yeah. Yeah. Agreed. Some companies catch lightning in a bottle and figure out- Yeah...
like, these... Like, Instagram back in twenty twelve, right? Obviously, like, that happens and explodes. But ninety-nine point X percent of companies are doing the unit economics game.
And if you can figure it out, like, there's an, a, a terrific business model to, to grow- Yeah... to grow a company.
So I would think that, like, Facebook, Instagram are, are highest volume, quote unquote, lowest quality. And I, I don't mean that as they're worthless.
I just mean that, like, you know, it's anytime you get, like, bigger, you end up... There's trade-offs to everything in life.
I would guess newsletters are the complete opposite, that if you do newsletter programs, the volume is lower, but the quality is higher. Correct. Yep. Absolutely all day.
And there's some scaled newsletter platforms out there that allow you to get to, like, get, get scale. But it just, at the end of the day, once you start- Yeah... overlooking those, then your CPAs double.
And then again, like, your unit economics are better off on Facebook. So we're just constantly trying to figure out- Yeah... where the best return on investment is. Do you worry about email as, like, a...
I'm not gonna be [chuckles] like, uh, you know, if you google, you know, "Is email dead?" Like, there's probably, like, a trillion Fast Company articles from the last two decades.
At the same time, I know that, like, anything that works in this industry ends up getting overdone. I think if there's, if there...
You know, if I ever were to, like, write a book of, like, the commercial internet, it would be The Tragedy of the Commons, would likely be the title. Yeah.
And look, newsletters is, I swear, like, Tim, like, even when I'm talking to people who literally five years ago, they were...
The same people were talking to me about, like, uniques and, like, their Facebook views, and now they're talking to me about their newsletter strategies. I'm like, "My God.
We're just gonna totally memory hole all the other conversations that we had over the years." I don't know. Do you worry? Because, you know, there's a lot more challenges. There's a ton of advantages to email and stuff.
At the same time, when we talk about things like MPP, the Apple move to, quote unquote, privacy, and the inbox is incredibly crowded now.
And I'm also reminded of the fact that there's been a long history in digital media of using things that were not its intended purpose for something else, like the third-party cookie was never meant to be the fulcrum of ad targeting, yet it became it.
Email was meant to be a personal communication channel. It wasn't meant to be a publishing channel. How do you see that risk? Obviously, there's a ton of benefits to email, but there are trade-offs to that.
Yeah, absolutely. So like, as you kind of hinted at, like, uh, email's the original killer app, as they say, right? You don't have the platform risk currently with, like... On social media, spam keeps us awake at night.
There's Gmail, et cetera. Yeah.
We, like, we, we use, like, some cr- pretty incredible partners that do, like, work on deliverability to make sure that our emails make it into the inbox, and if there is a spam issue, they can go reach out to the, the folks and, and address it and let them know that we're one of the, the good guys, so to speak.
So there's definitely risk, but I think it's a l- much lower, orders of magnitude lower than, you know, building an audience on, say, social media.
So yeah.I think, you know, we think about it, we're trying to get out ahead of it, but that's the, the big thing on the risk side. And on the benefit side, like, yeah, I agree.
I think there's a lot of newsletters starting. Like, when we started five or six years ago, it was just when it was getting going.
Now you have Substack and Beehiiv and ConvertKit and all these new places where, like, the creator economy can write content and then deliver it to the user. But I don't know.
I think at the end of the day, actually, like, I think that helps us, believe it or not, because again, in a world where there's information overload and more sources coming, we believe the user wants one source that has as much information as possible that they can use as, like, a guide to navigate it all.
And then they can get their three favorite Substack newsletters and their favorite p-politics newsletter.
But the-- we think, like, one newsletter that covers most of the rest of it that maybe you're not, like, incredibly passionate about, that you get seven newsletters on- Yeah. -we think that's good for us.
So final thing is, just 'cause you mentioned Substack and you're in email, what is your assessment of Substack as a business, and also, like, are you wedded to the newsletter? We're not wedded to it.
We think it's an incredible way to deliver information because of the push-pull dynamics, right? Like, ninety-five percent of app use is with five apps on your phone, right?
So you have this special relationship with someone in their inbox where they trust you to send them something.
Can we send them more when they wanna learn about, you know, different knowledge topics, like maybe, like, artificial womb or CRISPR or cancer, the Fed, all these things that, again, there's these wonderful resources all across the internet that are being written, to our point, about the newsrooms, but they're just not being matched.
So we think there's an opportunity in there somewhere, but we're not totally sure what it looks like, and we're trying to figure that out. Okay, cool. Awesome.
Well, Tim, thank you for, uh, spending all this time, um, and congrats on being part of the, uh, the one million per employee media club. It's a small one.
I know of Punchbowl, but I think that's the new metric for people to, to brag about. It's more impressive than the number of uniques. Nice. Yeah. Well, thank you so much for the opportunity.
It was awesome to connect with you. Also, just if I can be helpful to anyone in the media industry or young entrepreneurs who are trying to figure out how this all works, I love helping. I'm at tim@join1440.com.
Also would love to plug, if folks don't know about us, please read our newsletter. It's got one of the highest open rates in the space. Would love for you to check us out. Just give us a shot. That's all we can ask for.
So thank you, Brian, for, uh, the opportunity, and, uh, look forward to hopefully connecting again soon. Awesome. Well, thanks so much again.
Thanks for listening, and thank you to Jay Sparks for producing the Rebooting show. If you have a podcast that you're considering making, you should check out Podhelp us and what Jay can do for you. Go to podhelp.us.
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